1. Why is having a written partnership agreement essential for our family farming business?
Having a written partnership agreement clearly defines the partners’ interests in the business and establishes the relationship between all parties involved. This will minimise the risk of misunderstanding or dispute later.
2. Does the partnership agreement need to include a record of our assets?
You should be certain of what the assets of the partnership are and the partnership agreement should reflect that. It can be easy, particularly where the partnership endures over generations, to lose track of what is an asset of the partnership (particularly land) and what is a personal asset of a partner used by the partnership. This distinction will make a difference to the Inheritance Tax Treatment of the asset and the partners ability to deal with those assets.
3. How can we ensure the farming business passes to the next generation in the way we would like?
Be sure your Will and Partnership Agreement work together - provisions in your Will which apparently conflict with the provisions of a Partnership Agreement (such as where your partnership share ends up when you die and the rights of those people to become partners themselves) can result in administrative difficulty and unwanted consequences.
4. Should our accountant and lawyer talk to each other?
Certainly, there are issues that can arise if they don’t work together. For example, some sets of partnership accounts will automatically accrue undrawn profits under the heading Capital. This treatment can create confusion as to what forms a partner’s true fixed capital share and can make matters administratively difficult on the death or retirement of a partner or when a new partner is admitted. If these professionals work together issues can be addressed.
5. How can we be sure we’re getting the right advice?
Don’t be afraid to encourage your advisors to speak to each other - you will have more than one professional advisor - solicitors, accountants and land agents to name but three. The issues they will be advising on are interlinked but their knowledge, specialisms and perspectives can be very different. Periodic round-table meetings to ensure matters are proceeding as expected can be valuable. If there is an extraordinary matter, such as the sale of a plot of land for development, early collaboration between the three can ensure that the transaction or issue is dealt with in the most advantageous and/or least stressful way for the partners.
Would you like to know more?
Please contact one of our expert lawyers in this sector.
