All businesses are governed by a particular legal structure and so is corporate farming. In Canada, 90% of farm businesses are family owned operations involving somewhere around 1 million people. The farm business has its own set of peculiar social and economic problems, with a high risk status. In this post, we will take a look at the farm business structure in Canada and try to understand the underlying legal system and structures associated with it.
Formation of a farming business
A farm business with more than two participants can be conducted in two major methods:
- Partnership (general or limited)
- Limited Corporation
Understand the pros and cons of each of these methods and decide whether you should go for a partnership or whether you should incorporate your business.
Taxation has to be considered very seriously, as many tax-sensitive choices needs to be made. Most businesses compute income on an accrual basis, which means that income is reported as it is earned and expenses are deducted as they accrue. Farm and fishing businesses are an exception though, as they prefer using the cash method, where income is reported when received as cash and expenses are claimed when paid. The cash method is preferred by businesses like farming and fisheries because of the flexibility that the business offers.
Distribution
If you plan on distributing and retailing vegetables, you will have to comply with the Fresh Fruit and Vegetable regulations, under the authority of Canada Agriculture Products Act. This act is responsible for regulating the safety, grading, packing and making of fresh fruit and vegetables that are either produced in Canada or imported. It is this act that ensures that the steps taken for distribution leads to the making of safe, quality produce available to all Canadians.
Retail
The Canadian food retail sector is estimated to be worth $84 billion, which accounts for over 20% of total retail sales in Canada. This sector is generally regulated by the Consumer Packaging and Labelling Regulations. These regulations ensure and regulate the labelling and consumer packaging, and see to it that they are complete, consistent and accurate.
The above points summarize the legal structure governing corporate farming and the advantages and limitations they present you with. If you’re venturing into the farm business – whether production, distribution or retail – arm yourself with more knowledge. A lawyer can give you more in-depth information regarding the legal structure governing the farm business, after understanding your specific business objectives.