Most farms in Idaho are family-owned and operated. Here are some good ways to make a farm fail:
- Believing that the farm can financially support any and all family members who want to work on the farm. Farming is a business and expenses cannot exceed cash flows. You must consider whether the business can really support a family member.
- Presuming that a conversation is a contract. Statements by Dad that, “If you work hard, this will all be yours someday,” or “It’s yours when I die,” are not enforceable. Get things written down with the help of an attorney.
- Ignoring the in-laws or off-farm families. People may be members of the immediate family, but they have to contribute to the business to be compensated by the business. Communicate clear expectations – in writing – to all family members.
- Having no business-like meetings. A business is required by law to have at least one annual meeting. At that meeting, the family should have an agenda and review financial statements, discuss goals, make evaluations and review management decisions. Successful businesses meet often. Decisions should be made by voting based upon ownership of the company. People active in the business should be majority owners so that they can legally make decisions.
- Forgetting common courtesy. We sometimes treat strangers better then we do family members. It is important to treat family members who work on the farm as respected and valued members of the workforce.
- Having no estate plan, transfer plan or buy/sell agreement. Parents do not owe their children a business, but do owe them good morals, an opportunity for an education and legal plans for the estate. Failure to properly transfer management or ownership of a farm is a sure, painful and often expensive path to farm failure.
Success or failure of the family farm ultimately depends on good legal planning and treating your farm like the business it is.