Managing your farm sale or transfer

How do you sell or transfer your agribusiness to a relative? 

In Canada, agribusinesses are typically passed down from one generation to the next. If you choose to sell yours to your children, it’s possible that personal considerations will take precedence over financial factors.  

You may be tempted to transfer this asset to your loved ones at a price below its market value. If this is the case, there are a number of factors to consider:

• Equity between multiple children
• Your retirement income
• The leadership transition

By seeking the advice of a specialist, you’ll be able to see things more objectively, better understand the various stages involved in transferring a business and ensure a smooth transition.

What should you consider when transferring your agribusiness to one of your children? 

It’s possible that one of your children has a particular aptitude for farm work and wants to take over. Even if their siblings show no such interest, you should consider the impact of this transaction on all members of your family, as well as on employees. Make sure to check in with each of your children to answer their questions about your estate, understand their needs and find appropriate solutions. 

What if your children want to share your agribusiness? 

If more than one of your children wants to take over the business, it’s a good idea to: 

• Agree on the long-term vision in advance
• Define roles to avoid conflicts
• Draw up a notarized shareholder agreement laying out the life stages of your business

How do you manage the transfer of your agribusiness to an unrelated party? 

No successors in your family?

You could sell your agribusiness to an “unrelated party,” i.e., someone outside your family. It’s common to see these transactions between neighbouring farms – especially when the next generation is involved. It’s a way for farmers to expand their property while enabling their children to live nearby. This type of farm transfer can create synergy and optimize assets through shared machinery or labour.

Here are some tips and considerations to keep in mind with this type of transaction:

• Start by informing neighbouring farms of your intention to sell. You can also contact a real estate agent who specializes in the agricultural sector, but bear in mind that you’ll have to pay a commission.  
• Is selling the best option for you? There are other possibilities, such as leasing your land to neighbouring farms. Some organizations even pair up farm owners with younger farmers.  
• Is the longevity of your business important to you? If so, you could ensure its continued operation by making concessions on the asking price – even if the buyer isn’t a member of your family. 
• You could also encourage the next generation (whether they’re a family member or not) by offering them a balance of sale. This type of arrangement involves agreeing on an amount to be paid later to facilitate financing for the buyer.  
• People interested in your farm will want to visit your land and facilities more than once to make sure everything’s in order and to plan any investments that need to be made. 
• There may also be talk of changing how your property is used. For example, turning your dairy farm into a market garden or using your buildings to store machinery.  
• Some people may be interested in your land, but not in your property. If this is the case, be aware that the agricultural dezoning process can be complex. It’s best to call on specialists and notaries with the necessary expertise. 

How do you prepare for the sale or transfer of your agribusiness? 

Whether you’re selling your agribusiness to your children, a neighbouring farm or an unrelated party, there are a number of things to consider. The key to a smooth transition is being efficient without rushing into anything. 

Here are some factors to consider:

• When transferring your agribusiness, you need to allow for a transition period of at least five years. Take advantage of this time to establish your strategy, assess its impact and carefully weigh your decisions. 
• There are specific tax considerations in the agriculture sector. Be sure to consult a specialist with experience in agribusiness tax to find out how to reduce your tax burden, among other things. 
• If you’re selling to your children, you need to make sure they have the capacity and training to take over. You should also consider the role you want to play after the sale. 
• Think about what’s most important to you. You’ve devoted almost every day of your working life to your farm: What do you want to do after retirement? This can be a time for discussion and reflection. 

How can you prepare for the handover?  

The person taking over the reins of your agribusiness needs to be prepared for the challenges of ownership. Here’s how you can help them: 

• Remind your successor that being an entrepreneur can be demanding at times, and ask what makes them want to own a farm. They’ll find it easier to overcome challenges if their motivation is based on deep-rooted values.
• Encourage them to reflect on their vision for the business, their achievements, their training and the skills they need to acquire. 
• Help familiarize them with the best practices for taking over a business. 

How do you determine the price of your agribusiness? 

To find out what your farm is worth, we recommend consulting a valuation firm that specializes in agribusinesses. These specialists can determine the price of your property based on the value of your land, buildings, machinery and quota. 

They’ll also assess your agribusiness on the basis of its potential for profitability and performance as well as its ability to generate capital. 

Will you have enough money for your retirement? 

Owners of agribusinesses generally have limited financial diversification. A very large part of your retirement income is therefore likely to come from the sale of your farm. Make sure you don’t put yourself in a tricky financial situation when helping your children take over. 

Here are the steps you should follow: 

• Analyze your financial situation and assess your retirement needs.  
• Call on a financial planner to determine the standard of living you can maintain. They’ll identify your various sources of income, such as any government benefits or investments, and your RRSP if you have one. Based on your future plans, they can determine how much you can afford to withdraw each year for the rest of your life.  

What can you expect after the sale of your agribusiness? 

You may want to remain involved with your farm even after you’ve sold it. You could work there occasionally, either providing advice or helping out with certain tasks. Since you’ll no longer have full-time responsibilities, you’ll have time to gradually take on other activities.

But selling your agribusiness doesn’t mean the end – especially if your children take over. You need to think about your needs and goals, and plan carefully to achieve them. To make the transfer of your business a success, talk to a specialist who can guide you through the various stages and contribute to your peace of mind.