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Beginning Farm Business Arrangements. Testing Stage p. 1. Employer-employee arrangements Operating agreements. Employer-Employee Agreement p. 1. Compensation: Cash Wage and income share Incentives Bonus payments Fringe benefits Commodities. Operating Agreements p. 3.
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Testing Stage p. 1 • Employer-employee arrangements • Operating agreements
Employer-Employee Agreement p. 1 • Compensation: • Cash • Wage and income share • Incentives • Bonus payments • Fringe benefits • Commodities
Operating Agreements p. 3 • Beginning operator • May furnish some personal property such as livestock or machinery • May provide some management as well as labor
Operating Agreements p. 3 • Agreements should cover topics such as: • Job responsibilities • Contributions of assets • Distributions of income • Method of settling disputes • Dissolution of the agreement
Joint Operating Agreement p. 3 • Operators are sole proprietors • Each contributes assets, management and labor • Income is shared based on inputs • Each pays expenses of their assets • Operating expenses are split
Joint Operating Agreement p. 3 • Complete inventory should be taken at the beginning • Sale triggers recognition of gain • Could be transferred by gift • Could allocate income to pay for inventory • Could repay at end of agreement
Enterprise Agreements p. 5 • Beginning operator’s income is all from one enterprise • Labor for other enterprises may be a source of conflict
Total Farm Operating Agreements p. 6 • All income and operating expenses are split • Beginning operator acquires more assets over time
Leasing Considerations p. 6 • Allows effective use of limited capital • Short or long term • Land, buildings, machinery or livestock
Real estate leases p. 6 • Leases for more than a year must be in writing • 90 days notice is required to terminate a year-to-year agricultural lease
Real estate leases p. 7 • Cash leases • Crop share leases • Livestock share leases
Farm building leases p. 8 • Leasing from builder or bank • An alternative to financing • Leasing from a neighbor • Be careful about cost of repairs
Livestock leases p. 8 • From leasing company • From retiring farmer • Advantages for retiring farmer • Advantages for beginning farmer