farming partnership agreement

7810s

Member
Location
South Coast
I have been farming with my parent's full time for 22yrs now. We looked into and had a basic draft agreement drawn up back in 2000 but nothing was ever finalised. I am currently running the farm and doing all the work etc We have been trading and are recognised with the Inland Revenue and RPA as running the business as a partnership. The accounts are worked out at a third share each.
We are tenant farmers running three seperate tenancies, of which 2 are in my fathers name and the third between me and him.
I just wondered if anyone knew if we needed a legal partnership agreement drawing up and what the benefit of one would be?
I have asked a solicitor and he thought it would be useful, but me being cynical didn't know if he just wanted the work as it was going to cost a bit!
Thanks
 

Daniel Larn

Member
I have been farming with my parent's full time for 22yrs now. We looked into and had a basic draft agreement drawn up back in 2000 but nothing was ever finalised. I am currently running the farm and doing all the work etc We have been trading and are recognised with the Inland Revenue and RPA as running the business as a partnership. The accounts are worked out at a third share each.
We are tenant farmers running three seperate tenancies, of which 2 are in my fathers name and the third between me and him.
I just wondered if anyone knew if we needed a legal partnership agreement drawing up and what the benefit of one would be?
I have asked a solicitor and he thought it would be useful, but me being cynical didn't know if he just wanted the work as it was going to cost a bit!
Thanks
A well thought out legally explicit agreement is always 'useful', how useful is always up for debate.

Are you likely to get into some legal quarrel with your parents over anything? If so, an agreement will likely save you some money, as it will speed up that process and *guarantee* a result that you should be satisfied with (assuming any settlement is based on terms set out in that agreement).

If however, you aren't that worried about a legal challenge, and you are worried about some business/personal tax implications. Speak to a specialist accountant, as you can usually get a consultation and some fairly good advice for free.

The accountant may advise you to see a solicitor anyway, but I think it would depend on your circumstances a little bit.

This is just my opinion, so don't take my advice as anything other than that.
 

farmerdan7618

Member
Livestock Farmer
Location
Somerset
A partnership without an agreement will be governed bt the 1890 partnership act. Most of this is fine, and will be the basis of any agreement. A bit of a quirk with the act is that if a partner dies, the whole partnership ceases.
Fair risk on the tenancy, I would have thought. I would get an agreement done, and checked over by a good ag accountant.
 

chaffcutter

Moderator
Arable Farmer
Location
S. Staffs
A formal partnership agreement will be a proof of your being actively the successor to the tenancies, assuming that they are 3 generation AgAct and not FBT’s.
It should include provision for what happens when a partner dies or leaves for any reason so that the business can carry on trading without a messy re-start, that might involve valuations leading to CGT being payable. Go and see your accountant, preferably all together.
 

solo

Member
Location
worcestershire
A partnership without an agreement will be governed bt the 1890 partnership act. Most of this is fine, and will be the basis of any agreement. A bit of a quirk with the act is that if a partner dies, the whole partnership ceases.
Fair risk on the tenancy, I would have thought. I would get an agreement done, and checked over by a good ag accountant.
I farmed in partnership with my parents and when my father died two years ago the partnership carried on seamlessly without ceasing as there were still two partners left. We were backed up by a written partnership agreement. A partnership agreement will over rule a will we were told, so ideally make sure that both the partnership agreement and the wills say the same. This will save you any dis agreements at a later date.
 

7810s

Member
Location
South Coast
A partnership without an agreement will be governed bt the 1890 partnership act. Most of this is fine, and will be the basis of any agreement. A bit of a quirk with the act is that if a partner dies, the whole partnership ceases.
Fair risk on the tenancy, I would have thought. I would get an agreement done, and checked over by a good ag accountant.

Yes, but the tenancies are not in the business name anyway so surely they will have to be negotiated on the tenants death (my father)? Not sure a partnership agreement will help this?
 

7810s

Member
Location
South Coast
A formal partnership agreement will be a proof of your being actively the successor to the tenancies, assuming that they are 3 generation AgAct and not FBT’s.
It should include provision for what happens when a partner dies or leaves for any reason so that the business can carry on trading without a messy re-start, that might involve valuations leading to CGT being payable. Go and see your accountant, preferably all together.

The tenancies are both AHA and FBT. I am as sure as can be that I meet the critera for the AHA succession and the fbt's will have to be dealt with when the time comes. I am personally on good terms with both those landlords so would hope that helps.
 

neilo

Member
Mixed Farmer
Location
Montgomeryshire
I would advise anyone in your situation to get a proper partnership agreement drawn up, so everyone knows where they stand if there should ever be a need to dissolve it. Nobody ever sees that situation coming before it arises. I certainly didn’t before I was driven out.

I was bloody glad everything was formally documented, or the same person could have made life very much more unpleasant all round.

As above, it will also help as evidence of involvement in the business for AHA succession.
 

rose pilchett

Member
Location
ie
22 years service and parent partner seemingly unwilling to sit down and go through a reasonable succession process to quell the concerns of the OP

This sort of behaviour far too prevalent in the older generation of our industry

I went through similar anytime you raise a discussion you get told some day we ll speak to accountant lawyer blah blah blah but nothing ever gets done

Best of luck 7810s
 

Paul E

Member
Location
Boggy.
I'm not one to contradict @neilo , as he's usually about right.
But I don't think having a formal partnership will make a gnats fart of a difference to any succession.
As long as you have documented proof of trading and taking your livelihood from the farm, and you are otherwise eligible for succession, I wouldn't rush in on that score, unless there is something on the horizon which might need provision for?
But I'm only a shitkicker and know sod all.......:(
 

neilo

Member
Mixed Farmer
Location
Montgomeryshire
I'm not one to contradict @neilo , as he's usually about right.
But I don't think having a formal partnership will make a gnats fart of a difference to any succession.
As long as you have documented proof of trading and taking your livelihood from the farm, and you are otherwise eligible for succession, I wouldn't rush in on that score, unless there is something on the horizon which might need provision for?
But I'm only a shitkicker and know sod all.......:(

I would have thought that, if you get a landlord/agent who is trying to prevent succession, then the more documented evidence the better. If they are happy to allow succession, then a handshake would likely be enough.
I agree, a partnership agreement alone would prove much at all. Someone could be a partner and still derive most of their income from elsewhere.
 

Gadget

Member
Arable Farmer
Location
Sutton Coldfield
I think that the land is the most important to sort out. With multiple tenancys succession isn't guaranteed, it depends on the size of the holdings. In this case 7810s has a joint tenancy with his father, if that tenancy produces enough money to pay two fulltime men then he can't have succession on the other two.
It may be the case that it can't produce enough money so then one of the other tenancys can be added and if still not viable the third one.
When I went through this we had over 10 tenancys, ranging from 5ac to 80ac. My Agent admitted that he was out of his depth and directed us towards a specialist. At that time, as the tenant, I could name the order that the tenancys went before the Tribunal and, on advice, started with the smallest working up in size. That way, before the last one was heard, I did not have enough land and consequently am still farming it all.
The TFA would be a good place to start.
 

7810s

Member
Location
South Coast
It depends on how much land is involved with each tenancy, you can only have enough land to give you a li
I think that the land is the most important to sort out. With multiple tenancys succession isn't guaranteed, it depends on the size of the holdings. In this case 7810s has a joint tenancy with his father, if that tenancy produces enough money to pay two fulltime men then he can't have succession on the other two.
It may be the case that it can't produce enough money so then one of the other tenancys can be added and if still not viable the third one.
When I went through this we had over 10 tenancys, ranging from 5ac to 80ac. My Agent admitted that he was out of his depth and directed us towards a specialist. At that time, as the tenant, I could name the order that the tenancys went before the Tribunal and, on advice, started with the smallest working up in size. That way, before the last one was heard, I did not have enough land and consequently am still farming it all.
The TFA would be a good place to start.

All the land together struggles to pay one person a decent wage, let alone 2 full time men!
 

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