What does the landholding entity do in a Two Entity Model?

In a Two Entity Model, the primary function of the landholding entity is to own the land and lease it to the production entity. This arrangement allows the production entity to focus on agricultural production without the burden of land ownership responsibilities. By leasing the land, the production entity can operate efficiently, utilizing the land for farming or other agribusiness activities while the landholding entity manages the property itself.

This division of roles can enhance operational specialization, with the landholding entity focusing on asset management, while the production entity concentrates on the actual production processes. Such a structure can also provide flexibility and liquidity for both entities, as the landholding entity can acquire and manage multiple properties, and the production entity can invest its resources directly into productivity rather than land acquisition.