The paper concentrates attention on creation of institutional prerequisites for development of farms in frames of the model of agrarian economy of Ukraine. Using the institutional toolkit, the authors well-ground the necessity to support farms as specific business agrarian entities. Farms have potential to adapt in current conditions and improve their performance in future. Farming is also traditional for Ukraine as Ukraine has always been a strong agrarian country and this form of agrarian business that can raise the entrepreneurial spirit in the countryside. In case with farming, the owner, the householder and employees are combined in one person related to other employees that also bears social effect strengthening the family values. The authors consider the economic entities inside of the model of agrarian economy of Ukraine that is seen as a part of the model of national economy and part of economic system. The economic relations form inside of the model of economy with its peculiarities. The institutional conditions are specific «rules of the game» and the economic entities are also institutions functioning in the environment. Unfortunately, the appearing institutional prerequisites are not favorable for development of small and medium sized agrarian business whereas the large agrarian business gets enough support.