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What is contract farming?

In contract farming, a group of farmers and a company develop a mutually agreeable contract to undertake a farming enterprise. In the contract, the type of commitment, responsibilities, and sharing of rewards and risks are clearly discussed, agreed upon and specified. Developing the trust between the company and the farmer contractors is critical for success in contract farming. Each party must honor its commitments for the smooth operation and management of the relationship. Developing the trust takes time and efforts by both parties. Continuous flow of significant benefits from the venture to both parties will strengthen the relationship and trust among them.Contract farming provides better linkage among production, processing, and marketing, and all actors in the value chain—farmers, retailers, custom hire machine operators, retailers, traders, processing companies, and bankers—are key stakeholders. Banks provide credit to support and facilitate the win-win contract farming arrangement between farmers and companies. Some companies may share a part of their profit with farmer contractors to enhance trust, participation and sustainability in contract farming.For the purpose of contract farming, farmers in any country can be grouped into four categories based on their holding size, commercial orientation to farming, influence in local community and in political circles, and exposure to knowledge and technologies (Table 1). We need to develop different types of contract farming with different groups to enhance the synergy of operation and management and to minimize risks to both parties. The different types of contract farming are:1. Joint venture contract farming with very large commercial farmers (holding size more than 1000 ha each).2. Facilitating professional management for groups of large rice farmers.3. Facilitating knowledge sharing, credit, and sale of seed and critical inputs to small-scale and medium farmers.1. Joint venture contract farming with very large commercial farmers (holding size more than 50 ha each).In this case, a joint venture is developed between a company and the very large commercial farmers on individual or group basis, specifying the equity holding of each party. The farmers will be a part of the management committee of the joint venture. The equity holding for the contract farmer comes through provision of developed land with good water supplies for irrigation and labor needed for cultivating the crops. Major management decisions are jointly discussed and finalized by the company and the farmers well in advance of the cropping season. Farmers are responsible for all field operations and day-to-day decisions in managing the crops, while the company provides training and technical support, mechanization support for all operations, procurement and supply of good seed and other critical inputs (fertilizers, herbicides, and pesticides), and management of all post-harvest processing, packaging and marketing of the produce and byproducts. Suggested responsibilities of each party are shown in Table 2.In joint venture contract farming, farmers gain through improved and mechanized farming and increased yields from their farms. Farmers also get timely supply of good seed and critical inputs. The company secures assured supply of good quality paddy for processing and marketing. The profits of the joint venture are shared between the two parties as per the equity holding. Since both parties have large stakes in the running of the joint venture, the likelihood of success is high.2. Facilitating professional management for groups of large farmers.The second type of contract farming involves providing professional management to groups of large farmers with holding sizes of 11 to < 50 ha each. Large farmers can be encouraged to form themselves into groups (20 to 50 farmers per group). The company can develop a contract with each farmer group defining the roles and responsibilities of each party. Farmers provide land, labor, and some capital, and farm under the guidance of a trained extension specialist appointed by the company. The extension specialist will train the farmers, organize all inputs on credit or for cash, supervise all farm operations to ensure proper application of inputs and management of crops and to maintain product quality, and arrange the procurement of produce at agreed price. Roles and responsibilities large farmer groups and the private sector company are shown in Table 3. Thus, farmers have to follow strict guidelines in farming and maintain product quality as per the agreement. The credit given to farmers is recovered during the time of procurement. Some companies pay the contract price or the market price, whichever is higher at the time of procurement to build up the long-term relationship with their farmer contractors.3. Facilitating knowledge sharing, credit, and sale of seed and other critical inputs to medium and small-scale farmers.The third type of contract farming involves thousands of medium and small-scale farmers with farm holdings of < 10 ha each. The company can train trainers to develop trained public or NGO extension staff who in turn train farmers and provide technical support to them. The company can adopt 2-3 villages in selected locations to provide focused technical assistance to farmers through company-trained public or NGO extension staff. In the adopted villages, the company can work with retailers to assure timely supply of good quality seed and other inputs to farmers; train and work with local entrepreneurs to develop village-level machinery pools for custom hiring of farm machines and mechanized farm operations; train on quality standards and work with local commodity traders for procurement of the produce for the company; work with banks, educate them about the company’s support to improved farming in adopted villages, and encourage them to lend money to farmers in those villages; and liaise with local politicians and educate them on the company’s activities in supporting farmers in modern farming in their constituencies. Data in Table 4 show the roles and responsibilities of different stakeholders in the commodity value chain to support small farmers in improved farming. These initiatives will spread the risks among different stakeholders in the commodity value chain, and empower them to play their respective roles efficiently and help farmers adopt modern farming technologies. It will be a win-win partnership for all stakeholders because all of them gain from improved farming of a selected crop (e.g., basmati rice, soybean, cotton, sugarcane, etc.): farmers from increased crop yields and higher price for quality grain; retailers from assured supply of quality inputs from the company and enhanced sale to farmers; new employment for rural youth to develop and manage machinery pools and custom-hiring services; traders from enhanced procurement of good quality produce for the company; banks from increased lending to and recovering from trained and professionally supported farmers in adopted villages; and local politicians through enhanced prestige, respect and political power due to development of improved farming in their constituencies. The company will get adequate quantities of good quality produce for processing and also market their own good seed and other farm inputs such as fertilizers, pesticides and herbicides plus farm machines and implements for developing machinery pools. This will be one possible way to reach out to thousands of farmers in selected adopted villages.Private sector can play huge role in contract farming. Contract farming will solve the problems like quality of inputs, farms can be fully mechanized, crop monitoring on a regular basis, better technical advise free of cost at farmers’ doorsteps, assured upfront price and market outlet at their produce. Examples of contract farming corporates are: Mysore SNC Oil Company, Sami Labs, Ion Exchange (Enviro Farms), United Breweries, Satnam Overseas (Basamati rice), Amrtita Feeds, PepsiCo, Punjab Agro Foods, Apache Cotton Company, Mahindra and Mahindra, Cadbury, Godrej, ACE Agrotech, L&T, Hafed, BEC Co, Reliance Group, Fritto Lay India, etc.

How do I contact companies for joint venture?

THIS JOINT VENTURE AGREEMENT (the “Agreement” or this “Joint Venture Agreement”), is made and entered into as of this [DATE], by and between [PARTY 1] (hereinafter “[SHORTENED NAME OF PARTY 1]”), a [STATE] corporation, with a registered office located at [ADDRESS], and [PARTY 2] (hereinafter “[SHORTENED NAME OF PARTY 2]”) , a [STATE] corporation, with a registered office located at [ADDRESS].WHEREAS, “[PARTY 1]” is in the business of [BUSINESS DESCRIPTION], andWHEREAS, “[PARTY 2]” is in the business of [BUSINESS DESCRIPTION], andWHEREAS, the parties desire to establish between them a joint venture in order to collaborate in [JOINT VENTURE DESCRIPTION],NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants and commitments set forth herein, the parties hereto agree as follows:1. FORMATIONThe joint venture formed by this Agreement (the “Joint Venture”) will conduct its business under the name [JOINT VENTURE NAME], and will have its registered address at [ADDRESS]. The Joint Venture shall be considered a joint venture between the Parties in all respects, and in no event shall this Agreement be construed to create a partnership or any other fiduciary relationship between the Parties.2. PURPOSEThe Joint Venture shall be formed for the purpose of Provide a description of the products and/or services that the Joint Venture is concerned with, and the objective/purpose of the Joint Venture.3. CONTRIBUTIONSThe Parties hereto shall each make an initial contribution to the Joint Venture as follows:1. [PARTY 1]’s Contribution:PandaTip: Here’s where you’ll want to state what each Party’s initial contributions are. That may include financial, equipment, goods, resources, development and other valuable contributions. Also, specify when the Party needs to provide each of these contributions.2. [PARTY 2]’s Contribution:A bank account at [NAME OF BANK] shall be opened by [PARTY 1] on behalf of the Joint Venture, and the financial contributions of the Parties shall be deposited by the due date set forth above. Should the Joint Venture require additional funding, additional financial contributions shall be made equally by the Parties.4. DISTRIBUTION OF PROFITSAny and all net income accruing to the Joint Venture shall be distributed equally to the Parties.PandaTip: You may prefer to reinvest these profits in lieu of paying them out.5. MANAGEMENTThe following individuals in the following positions will comprise the Joint Venture’s management (the “Management Team”). The Management Team will be structured such that [DESCRIPTION OF MANAGEMENT STRUCTURE].PandaTip: As part of the Management Description, you will want to speak to how decisions are made. Is it by majority or otherwise?Management Team:[NAME], [POSITION][NAME], [POSITION][NAME], [POSITION][NAME], [POSITION][NAME], [POSITION]6. RESPONSIBILITIES OF THE PARTIESThe Parties will each have the following responsibilities under the Joint Venture:PandaTip: While you have your contributions during formation, you also need to execute the Joint Venture business. That said, what do you see as the responsibilities of the parties?[PARTY 1]’s Responsibilities:[PARTY 2]’s Responsibilities:7. NON-EXCLUSIVITYNo exclusivity is formed by virtue of this Joint Venture Agreement and neither Party shall be obligated to make offers to the other related to any business.8. TERMThis Agreement shall commence on the date first written above and remain in full force and effect for an initial period of [NUMBER] years (the “Initial Term”). At the end of the Initial Term, this Agreement will automatically renew in one year increments (each, a “Renewal Term”), unless and until this Agreement is terminated in accordance with Section 8 hereinafter.9. TERMINATIONEither Party shall have the right to terminate this Agreement, effective as of the end of the Initial Term or any Renewal Term, by providing the other with written notice of termination at least thirty (30) days prior to the end of such Initial Term or Renewal Term. Neither Party shall have the right to terminate this Agreement at any other time, unless such termination is mutually agreed to by the Parties hereto. The Joint Venture shall terminate upon termination of this Agreement.10. CONFIDENTIAL INFORMATIONThe Non-Disclosure Agreement entered into by the Parties as of [DATE] (the “NDA”) is applicable to the Joint Venture and shall apply in full force and effect to any and all Confidential Information (as defined in the NDA) exchanged or otherwise accessed by a Party under this Agreement.PandaTip: We’re making the assumption that an NDA is already in place. Make sure you check the end date if you are going to reference it in this Agreement since you may need to extend the NDA to coincide with this Agreement.11. FURTHER ACTIONSThe Parties shall execute any documents and take all appropriate actions as may be necessary to give effect to the Joint Venture.12. ASSIGNMENTNeither Party shall assign or transfer any of its rights or obligations hereunder without the prior written consent of the other Party, except to a successor in ownership of all or substantially all of the assets of the assigning Party if the successor in ownership expressly assumes in writing the terms and conditions of this Agreement. Any such attempted assignment without written consent will be void. This Agreement shall inure to the benefit of and shall be binding upon the valid successors and assigns of the Parties.13. GOVERNING LAWThis Agreement shall be governed by and construed in accordance with the laws of the State of [STATE], without regard to conflicts of law principles.14. COUNTERPARTSThis Agreement may be executed in any number of counterparts, each of which shall constitute an original, and all of which, when taken together, shall constitute one instrument.15. SEVERABILITYThe Parties recognize the uncertainty of the law with respect to certain provisions of this Agreement and expressly stipulate that this Agreement will be construed in a manner that renders its provisions valid and enforceable to the maximum extent possible under applicable law. To the extent that any provisions of this Agreement are determined by a court of competent jurisdiction to be invalid or unenforceable, such provisions will be deleted from this Agreement or modified so as to make them enforceable and the validity and enforceability of the remainder of such provisions and of this Agreement will be unaffected.16. NOTICESAll notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement: (i) when personally delivered; (ii) upon receipt of a telephone facsimile transmission with a confirmed telephonic transmission answer back; (iii) three (3) days after having been deposited in the mail, certified or registered, return receipt requested, postage prepaid; or (iv) one (1) business day after having been dispatched by a nationally recognized overnight courier service, addressed to a Party or their permitted assigns at the address for such Party first written above.17. HEADINGSParagraph headings used in this Agreement are for reference only and shall not be used or relied upon in the interpretation of this Agreement.18. ENTIRE AGREEMENTThis Agreement contains the entire agreement and understanding between the Parties, superseding all prior contemporaneous communications, representations, agreements, and understandings, oral or written, between the Parties with respect to the subject matter hereof. This Agreement may not be modified in any manner except by written amendment executed by each Party hereto.In Witness Whereof, the Parties have caused this Joint Venture Agreement to be duly executed and delivered as of the date first written above.[PARTY 1]_________________________________ ______________[NAME], [TITLE] DATE[PARTY 2]_________________________________ ______________[NAME], [TITLE] DATE

How does a US based entrepreneur start a company with an India based co-founder?

The best advice is to hire a lawyer. Unfortunately, the different issues that can come up in this situation are far too complicated to be addressed here. That being said, I can hopefully clear up some things for you to paint a better picture of what you will need to do.LLCs are a wonderful business entity that have exploded in the past 20 years. They afford their owners a great deal of flexibility while still possessing some basic standard corporation features that give owners protection. Aside from this, LLCs have very limited restrictions in terms of their ownership, as in who and what can have an ownership interest in the company.However, LLCs will have somewhat complicated tax issues. The regulations vary state by state, and what an LLC is considered in one part of the US may be something entirely different somewhere else. Most notably, many states will consider LLCs owned by one or two individuals as partnerships or sole-proprietorships, and thus have different applicable tax regulations.From the sound of your post, it seems like it will be simply a joint-venture between you and one other person. That being the case, you should definitely look into your state laws and regulations to see if there are any additional steps you will need to take to file.The beauty of LLCs is that they allow their owners ("members" once you become an LLC) the ability to be creative when forming the corporate structure of their company. Founders can include features of partnerships, corporations, or other legal entities, as long as it is included in the certificate of incorporation and placed in the by-laws.Conversely, because LLCs are somewhat "new" in the legal world, the law is still developing around these entities. So many states have incomplete or contradictory legal approaches to LLCs. When forming your LLC, you should really look into the state you are operating in and do some preliminary research.Realistically, a lawyer will be your best bet. You should check out LawTrades. Finding a lawyer in your jurisdiction who has experience forming LLCs for startups will have a great deal of knowledge that can seriously help you in your early stages. I have founded two different startups and my lawyer has been invaluable to both companies. I have avoided so many issues and have been able to maximize corporate opportunities with sound legal guidance.My best advice would be to find an attorney who has experience with international business or startup expertise. Finding a lawyer who has helped other companies get off the ground with international owners can be so beneficial for your company. That way, you can be certain that the advice you are receiving will ultimately save your business money and that your attorney has a good understanding of potential legal issues and help you avoid these problems.I hope this answer is somewhat helpful. If you want to take a look at the IRS website regarding LLCs, here is a link to their site; Limited Liability Company (LLC). At least that will give you a starting point. If you need any help with anything else, please don't hesitate to reach out. Good luck!

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