Many businesses run as partnerships, whereby a number of individuals will be involved in running the business. In this article, I am going to look at Partnership Agreements specifically for Farms.
For farming partnerships, the following common factors will often exist:
- Inter-family and inter-generational.
- Desirability for the business to be passed through generations.
- Often holding assets of high value.
Although a written partnership agreement is not needed in law, it will normally be recommended. A partnership agreement will be used:
- To confirm profit entitlements.
- To prevent dispute.
- To detail banking and borrowing arrangements.
- To document the delegation of roles and functions within the partnership.
- To deal with retirement, death and succession. It is noted that a partnership agreement overrides the terms of the Will. Options may be included in the partnership agreement to allow the remaining partners to buy the deceased’s share in the partnership and the document will often include a valuation procedure.
- To detail the procedure for the admission of new partners and gifts of partnership interests.
- To document the procedure for the dissolution of the partnership.
- To confirm capital entitlements including the ownership of land.
Ownership of Land
Land can be owned outside of the partnership or alternatively it can be introduced into the partnership with capital accounts being used to reflect the ownership of the asset by each partner. It is noted that having the land as a partnership asset potentially brings enhanced reliefs from Inheritance Tax.
If you would like any assistance with Partnership Agreements for Farms, please get in touch.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.