Family partnership - trapped!

[crashbox]

It's no shame not to understand accounts,

Perhaps.

But the most profitable farmers will have a good handle on their accounts.

It's about what your priorities are, but we are running businesses with the objective of creating wealth.

 

[Chae1]

Perhaps.

But the most profitable farmers will have a good handle on their accounts.

It's about what your priorities are, but we are running businesses with the objective of creating wealth.

I've started doing farm accounts myself. Gives a great insight to business and what's going on.

Would recommend it to anyone. Particularly in partnerships, can see exactly who's spending what.

 

[crashbox]

I've started doing farm accounts myself. Gives a great insight to business and what's going on.

Would recommend it to anyone. Particularly in partnerships, can see exactly who's spending what.

And you're in a better position to go to discussion club to compare costs and improve.

 

[Chae1]

And you're in a better position to go to discussion club to compare costs and improve.

I don't go to them. Most of things that make or break you in farming outwith your control. Weather, input prices and selling prices

 

[Nearly]

It's definitely the hours rather than the money that is the biggest issue in most new farming relationships.

Half a day off to go to a sale 100 miles away is always doable.
If it comes to a weekend away then it's less likely to happen.
Someone has to feed the beasts.

Edit - Dad (gone now) encouraged me to go to off farm stuff when I was young and daft.
You always learn something on a farm walk, even if it's what not to do.
The cheapest mistakes to learn from are someone else's.

 

[som farmer]

I don't go to them. Most of things that make or break you in farming outwith your control. Weather, input prices and selling prices

its important to get out of the farm, to meet other like minded people. Over the last 50 odd years, there would be very few farm walks, meetings and clubs, where l haven't come away with useful 'things'.

some may be 'don't do that', home made gadgets, that l could use, or a simpler, or harder, way of doing 'something'.

all big positives, without digging into your finances.

 

[goodevans]

I don't go to them. Most of things that make or break you in farming outwith your control. Weather, input prices and selling prices

So thats most of them then

 

[Farmer_Joe]

I've started doing farm accounts myself. Gives a great insight to business and what's going on.

Would recommend it to anyone. Particularly in partnerships, can see exactly who's spending what.

mrs has always done out although a smaller enterprise really keeps you focused on costs etc.

to the op as other have said how on earth can you have no capital if you if you have not drawn your share of profit where is this money it must have been accounted for somewhere i.e in the accounts?

 

[warksfarmer]

If your partners 51% and 49% then surely you own 49% of assets… not just the £20,000 youv put in..

Not really if the partnership doesn't own the land. Partnership assets are generally things like stock and machinery.

 

[Skintagain]

If you aren’t happy and only have 20k in job walk away and plough your own furrow

 

[dinderleat]

I think I’ve got myself into a pickle mainly down to my own naivety.

I’m a partner in the family business - my father and myself.
we’re a tenanted farm with a reasonably sizeable livestock enterprise.
In terms of profit, we are split 51% to my father and 49% to me. Total profits on the accounts would be around 100k per year but I draw £24000 per year and leave the rest of my share of profit in the business - same for father.

the issue is as I’ve been looking more into the accounts, I actually have virtually no capital in the business (20k ish). We’ve expanded a lot over the last 4/5 years so we’ve got a big overdraft which me and my father both signed for as partners. So I think I’m response for about 150k of overdraft but have hardly any capital.
i think basically without personally growing capital in the business then I’m no more than an employee, or more accurately - an employee with a load of debt.
me and my wife are at the stage we think we’d be much better going on our own but surely I’d have to pay my share of debt to leave the partnership? So we’d be in a massive hole straight away.
Got a meeting with the accountant in 10 days so will get some clarity.
basically I’d be doing all the physical work and putting in a lot of hours so never get chance to look at the inner runnings of the business which gets left to father.
another key point is - we don’t have a partnership agreement
Anybody have an opinion on my situation?

Have gone through similar, been very difficult at times But we are finally getting there I think.
A partnership agreement is a must, it just protects the business/partners in the event if a partner dies.
Being open and honest is key. Not every situation is the same so is difficult to find advice how you should or shouldn’t do things but as long as all partners agree that’s a step in the right direction.

 

[T C]

I don't want to add to the presssure.....but!
What is the position of the tenancy?
Your security (or lack of) tenure is the most important factor in the future of the business.
I realise that there are always cash requirements, however if your house and livelihood is dependant on your Father's tenancy then I would suggest you try to get on the property ladder off the farm.

 

[Cowabunga]

It is concerning that the business aspect is left to the father and son working at home has not been involved in the actual ‘business’ side of things. It’s not unusual though, because my brother and I are totally different in that regard and I’ve been involved, or made myself involved in management since before I left school and with my mother’s encouragement we both became official partners in the business when he was 20 and I 21. He has no interest in the management and financial affairs though and is unmarried. His choices. He has his own house and lives independently in the village.

The farm assets were transferred to the both of us well before father retired so there was no tax on his or my mother’s recent deaths. I have made sure that we have more than adequate pension plans and savings and indeed mortgage free property for our old age and to hand over to my only daughter when the time comes. Indeed we are in discussion currently about transferring a house into her name with the least tax issues.

The point being that the son in this original post really must get a grip of what is going on in the business and gain some security and an understanding of his possible responsibilities and obligations with regard to the business debt and assets. Both father and son should work towards the future security of the business and the handing over of assets to the son, who is the future of the business.

Far too many farmer parents just don’t get it. They have no clear idea of where their business is going and why they are doing it. It can get to the point that the father becomes jealous of the son and wants to retain complete control of it into his dotage with a son or sons at home having to sell assets to pay off sisters established elsewhere, leaving the sons with zero assets and not even their own homes to live in when their parents die. Hopefully, as tenants, they have already secured their own homes, not being tenants there as well, if they do happen to lose the tenancy of the farm at some point. All parties need security.

It can all get very complicated and every family and farm business is different, but able, intelligent sons and daughters should take responsibility for their own interests and welfare, including their wives and children, not leaving it to their parents on trust. That trust is often sadly broken, especially but not exclusively where sons are concerned.

 

[dinderleat]

It is concerning that the business aspect is left to the father and son working at home has not been involved in the actual ‘business’ side of things. It’s not unusual though, because my brother and I are totally different in that regard and I’ve been involved, or made myself involved in management since before I left school and with my mother’s encouragement we both became official partners in the business when he was 20 and I 21. He has no interest in the management and financial affairs though and is unmarried. His choices. He has his own house and lives independently in the village.

The farm assets were transferred to the both of us well before father retired so there was no tax on his or my mother’s recent deaths. I have made sure that we have more than adequate pension plans and savings and indeed mortgage free property for our old age and to hand over to my only daughter when the time comes. Indeed we are in discussion currently about transferring a house into her name with the least tax issues.

The point being that the son in this original post really must get a grip of what is going on in the business and gain some security and an understanding of his possible responsibilities and obligations with regard to the business debt and assets. Both father and son should work towards the future security of the business and the handing over of assets to the son, who is the future of the business.

Far too many farmer parents just don’t get it. They have no clear idea of where their business is going and why they are doing it. It can get to the point that the father becomes jealous of the son and wants to retain complete control of it into his dotage with a son or sons at home having to sell assets to pay off sisters established elsewhere, leaving the sons with zero assets and not even their own homes to live in when their parents die. Hopefully, as tenants, they have already secured their own homes, not being tenants there as well, if they do happen to lose the tenancy of the farm at some point. All parties need security.

It can all get very complicated and every family and farm business is different, but able, intelligent sons and daughters should take responsibility for their own interests and welfare, including their wives and children, not leaving it to their parents on trust. That trust is often sadly broken, especially but not exclusively where sons are concerned.

That’s a well written post and very good advice

 

[ollie989898]

As with many things it may boil down to a difference in the interpretation of the language used.

In business a 'partnership' tends to be a number of individuals great than 1 with some or even equal equity in a business.

In farming, the term 'partnership' appears to be something you foist on your offspring at around the age of 18-21 and relates to a form of bonded labour.

 

[som farmer]

It is concerning that the business aspect is left to the father and son working at home has not been involved in the actual ‘business’ side of things. It’s not unusual though, because my brother and I are totally different in that regard and I’ve been involved, or made myself involved in management since before I left school and with my mother’s encouragement we both became official partners in the business when he was 20 and I 21. He has no interest in the management and financial affairs though and is unmarried. His choices. He has his own house and lives independently in the village.

The farm assets were transferred to the both of us well before father retired so there was no tax on his or my mother’s recent deaths. I have made sure that we have more than adequate pension plans and savings and indeed mortgage free property for our old age and to hand over to my only daughter when the time comes. Indeed we are in discussion currently about transferring a house into her name with the least tax issues.

The point being that the son in this original post really must get a grip of what is going on in the business and gain some security and an understanding of his possible responsibilities and obligations with regard to the business debt and assets. Both father and son should work towards the future security of the business and the handing over of assets to the son, who is the future of the business.

Far too many farmer parents just don’t get it. They have no clear idea of where their business is going and why they are doing it. It can get to the point that the father becomes jealous of the son and wants to retain complete control of it into his dotage with a son or sons at home having to sell assets to pay off sisters established elsewhere, leaving the sons with zero assets and not even their own homes to live in when their parents die. Hopefully, as tenants, they have already secured their own homes, not being tenants there as well, if they do happen to lose the tenancy of the farm at some point. All parties need security.

It can all get very complicated and every family and farm business is different, but able, intelligent sons and daughters should take responsibility for their own interests and welfare, including their wives and children, not leaving it to their parents on trust. That trust is often sadly broken, especially but not exclusively where sons are concerned.

well written

as soon as my mother and sisters realise OM will was very badly written, and could be 'challenged', they did, and all 3 of them insisted the farm was sold, so mother could have the money.

That would have left me homeless, not their concern at all. Anyway stopped that happening. I was the benefit of a large insurance policy, which enraged them even more, demanding l share it, ha ha. A 'deal' was cobbled together, and l rented the farm from a 'trust'. Just about to sought that out, 30 yrs on.

realised long ago, l was cheap labour, like many. But it is only recently that l realised mother and sisters thought l was thick/stupid, or whatever, and having had nothing to do with them for 30 yrs, sisters presumed that again.

l think they now realise that was a big mistake.

but its so common, that when a farmers dies, the vultures gather, and farms and stock are worth serious amounts of money today, which attracts even more vultures, solicitors.

but even with the common knowledge of what happens, farmers have the tendency to ignore it, and leave no will, or a badly written one, do not pass on assets etc, and deep down, they know they are leaving a mess.

so, senior farmers, write an up to date will, pass assets on, to avoid tax, make sure the person you want to continue farming, actually can. Laws and their interpretation, continually evolve, so what was correct, 10 yrs ago, is no longer true, or interpretably differently. The easiest, cheapest, and unarguable thing to do, is write a short letter, or long, stating what you wish to happen, and why, in your own handwriting, its then clear about the meaning of will.

or simply pass everything on, before you require the 'care home', whose fees will soon remove any money you wish to pass on .....!!

 

[serf]

or simply pass everything on, before you require the 'care home', whose fees will soon remove any money you wish to pass on .....!!

Trouble is it's not always ' simple ' in everyone's case !
Pass it on you either incure CGT liability or use hold over but still create the liability but you could 'gamble ' on handover after death and hope for 100% APR /BPR and have a realtime CGT reset for future benefit .

Have a death halfway through handover and not see 7 years out and have worse of all worlds scenario.

Handover and worry about The 3 'Ds'
and the grief all that could involve....

And a load more scenarios that all these things bring up with families / siblings and high value assets ...

 

[som farmer]

Trouble is it's not always ' simple ' in everyone's case !
Pass it on you either incure CGT liability or use hold over but still create the liability but you could 'gamble ' on handover after death and hope for 100% APR /BPR and have a realtime CGT reset for future benefit .

Have a death halfway through handover and not see 7 years out and have worse of all worlds scenario.

Handover and worry about The 3 'Ds'
and the grief all that could involve....

And a load more scenarios that all these things bring up with families / siblings and high value assets ...

money is the root of all evil.

but its not easy to fairly share out, and that is probably the reason why so many don't leave things tidy.

land can be IH free, but assets can be passed on, live dead stock.

How long you live, is not ours to decide !

 

[serf]

but its not easy to fairly share out

And fair doesn't necessarily mean equal .

 

[serf]

but assets can be passed on,

They you have to make sure the old generation are out of the house or at least on paper or you have gift with reservation ...

They got you on every hurdle just about , take your pick