Definition: Net entrepreneurial income

Category: National accounts

Net entrepreneurial income, obtained by adding the interest received by agricultural units organised as companies to the net operating surplus and then deducting rent (i.e. farm and land rents) and interest payments, measures the compensation of unpaid labour, remuneration from land belonging to units and the yield arising from the use of capital. It is similar to the corporate-accounting concept of current profit before distribution and taxes on income. Although net entrepreneurial income is not always calculated for industries, it can generally be evaluated for the agricultural industry as it is possible to determine the part of interest and rents linked exclusively to agricultural activity (and to secondary, non-agricultural activities).
In the case of sole proprietorships, entrepreneurial income represents, on the one hand, the compensation of the work performed by the agricultural holder (and the work of unpaid family members) and, on the other hand, the income remaining with the enterprise, without it being possible to separate these two components (the term "holder" as used here naturally refers to all persons who run sole proprietorships in this industry). It is, therefore, a mixed income. Like any other industry, however, the agricultural industry comprises production units that belong to different types of institutional units: companies and sole proprietorships. There is a difference between entrepreneurial income generated by sole proprietorships and that generated by units organised as companies. In the latter case, it represents "straight" entrepreneurial income as it excludes any labour income (compensation of work has to be regarded as compensation of paid labour even if it relates to the administrators and shareholders of the company). http://ec.europa.eu/eurostat/ramon/statmanuals/files/KS-27-00-782-__-I-EN.pdf