Do you have a farming partnership agreement?

Calling All Farming Families…

Lauren Dixon, from our Rural Law Practice writes:

We know that running a business as a family brings with it a whole heap of frustrations.

Are you jointly involved in the farm with other members of your family? Do you have a partnership agreement? If not why not?! No, REALLY, why not? We know that you’re sick of hearing about it, but if you don’t have an agreement the provisions of the Partnership Act 1980 can apply.

That means:

  • The death of any partner automatically ends the partnership. Think about the implications of that on your bank accounts, contracts etc. - would you be able to carry on?
  • Any partner can terminate the business and require all the assets to be sold - pretty much on a whim, are you prepared for that?
  • Profits and losses should be divided equally – is that how you want things to run?
  • Partners can sign a contract which will bind all of the others, without asking them – again, think about the implications of that, particularly in the context of ill health and financial difficulties.
  • A retiring partner can demand to be paid out immediately – could your business cope with that, or would it be better to provide for staged payments or a time frame for payment?
  • The partnership accounts can be used as evidence of who owns what – Are your accounts an accurate representation of who owns what? Think about owned land and properties and the value attributed to it – are all partners clear about whether that is personal or partnership property?

A partnership agreement makes clear what assets belong to the partners individually and which belong to the partnership. It makes clear what happens if one partner should pass away or choose to leave the partnership and can provide for a sensible way of navigating those events and disputes that arise.

Ill health, family disputes, divorce and bereavements can happen to anyone at any time. Do you really want the added burden of costly legal disputes at a time of emotional stress – would you not rather be proactive and organised now, when everyone is in good health and on good terms? We promise it is not that painful! A partnership agreement protects all parties. It protects the business. It means that there is a clear understanding of what is expected from each other and from the future.

If you think that sounds sensible, we are here to assist and work with you– just get in touch with our Rural Law team

Published 14 July 2020

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