FOR RETIRING FARMERS AND THEIR FAMILIES

Joint ventures and equity partnerships: bringing a backer onto the farm

Not every farmer who steps back wants to sell up, or hand over everything.

Some want to sell part of the business to someone with capital, keep a share themselves, and leave the running of it to people with the skills to do it well.

That's a joint venture, or an equity partnership. Ageing on Farm, the Cultivate Farms book for farmers stepping back, sets it out as option six.

How a joint venture works

A farming entity is set up, often a company. Its shareholders might be farmers, landowners, family members who live off the farm, or an outside backer.

Profits are either put back into the business or paid out to the shareholders. The farmers who manage the operation are paid a salary. If they're shareholders as well, they share in the profits too.

Owning it and running it are separate

One side brings the money and owns the asset. The other brings the skills and runs the farm. Both benefit.

For you, that can mean selling some of your share to a backer, freeing up cash for retirement, and keeping part of the business yourself.

You go from being the person who runs the farm to someone who shares in its success, without the physical load.

Why it can outlast any one person

Because it's set up as a formal entity, with proper governance and reporting, the business doesn't depend on any one person in it.

If the manager retires, the business finds a new one. If a backer wants out, they sell their shares. The land and the operation carry on.

The benefits

• It runs as a proper company, with clear accountability and regular reporting.
• Outside backing provides capital to grow, without personal debt.
• The land stays intact as one generation hands over to the next.
• The business can bring in the best operators on ability, not just family connection.
• Retiring shareholders can sell their shares over time, which gives a clear way out.

The drawbacks

• Other shareholders get a say in decisions that used to be yours alone.
• Someone leaving can disrupt the business, if the shareholder agreement didn't plan for it.
• Badly drafted agreements can lead to arguments over dividends, how much goes back into the business, or where it's heading.
• It's more complex and costly to set up than simpler arrangements. You'll need a good lawyer and accountant.
• Not everyone shares your values about the land.

A question to start with

Would you rather own all of the land yourself, or are you open to sharing some of it, or handing some on?

If you're open to it, choose your partners as carefully as you'd choose the farmer.

The full guide, Ageing on Farm, is free at cultivatefarms.com/resources.

You can build your own plan at cultivatefarms.com/plan.