Legal questions that arise in farm business operations
Agricultural entrepreneurs inevitably encounter situations throughout their careers where they need legal advice. The advice varies greatly depending on the stage of the farm’s lifecycle. Those planning to start a farm require guidance on very different matters compared to those who have been actively operating. In the later stages of farm operation, issues related to generational succession and transitioning the business to the next generation become more prominent.
When a farm is passed on to a child, parents usually want to direct the ownership of the farm solely to their child, not to their child’s spouse. In this case, considerations must be given to a prenuptial agreement or a will, depending on how the farm is transferred to the child. For instance, a will can specify that the management rights of the farm remain with the spouse until the children reach the age of majority. Setting up a durable power of attorney is also crucial. Typically, the entrepreneur’s contribution to the business is significant, and what happens to the farm if something unfortunate happens to the entrepreneur? The risks are substantial. In practice, this means granting authority to another person to manage farm-related matters in the event of an accident or illness. Through the power of attorney, their spouse can, among other things, sell crops, apply for EU subsidies, and enter into cultivation agreements.
Agricultural entrepreneurs often aim to expand the size of their land or forest holdings. For instance, the legal aspects of forest and land sale agreements have their own intricacies where the assistance of a lawyer is advisable. Matters to consider together could include taxation upon sale and forest deductions. In dividing the purchase price, the buyer should take into account a 60 percent deduction from the purchase price of the forest land in their taxation.