In the most recent Agricultural Census, conducted in 2017 in Brazil by the Brazilian Institute of Geography and Statistics (IBGE), it is possible to identify that in family farming the management of the property is shared by the family and the agricultural and livestock production activity is the main source of income.
This type of business accounts for 77% of the establishments in the agricultural and livestock sector in Brazil, which corresponds to 3.9 million establishments. Its revenue is on the order of R$ 107 billion, equivalent to 23% of all Brazilian agricultural and livestock production (2017 data).
In terms of area, family farming businesses total around 90 million hectares, which represent 23% of the total area of agricultural and livestock establishments in the country.
In this scenario, it is common for the rural producer to be a natural person, the owner of their own economic activity, generally carried out together with their family.
But, in this case, how can a more adequate condition be ensured with regard to asset security and the longevity of the business?
Incorporating a company
The overview brought by the Agricultural Census shows the magnitude and strength of this economic activity and its business profile. More than that, it indicates how much the family business can develop and how much room there is to evolve from a natural person to a company. Thus, the incorporation of a rural holding company stands out as a trend in Brazil that is here to stay.
What you need to know
A rural holding company is a company created to manage the family’s assets and its agricultural and livestock sector businesses, aiming at longevity and growth.
In addition to protecting family assets, incorporating this type of company can help professionalize the business and make succession less costly, in comparison with a probate proceeding for family assets – it is more advantageous than carrying out a probate proceeding*, a process that generally takes quite a long time and involves many court costs and expenses.
But it is not only for financial reasons that the incorporation of a rural holding company plays a prominent role in succession planning. This option has proven to be a promising path, capable of preventing possible conflicts after the death of the family business administrator, by means of legal instruments capable of making the good relationship between partners and family members prevail.
Reduction of the tax burden
Another reason that has attracted producers’ attention to the rural holding company is the reduction of the tax burden within what the law determines.
In this respect, tax planning helps the company obtain economic benefits due to the difference in tax collection between a natural person and a legal entity.
You can learn more about this subject on our website, by accessing our article Rural holding company brings economic benefits and asset protection. Click here to read.
* Probate proceeding – After the death of a person, all of their assets, including rights and debts, become a single whole. The probate proceeding is an instrument to formalize the division and transfer of assets to the heirs. It may be judicial or extrajudicial (through agreements).
By Glauber Ortolan – previously published on the attorney’s profile
← Back to blog