Forming a family partnership

[Formatted]

Currently in partnership with my wife on our tenanted farm we're looking at expanding and going into partnership with my wife's parents. We are taking professional advice but does anyone have any common pitfalls, generic advice on how to ensure the success and longevity of the partnership?

 

[TomD]

Dont get caught cheating.....

 

[neilo]

Make sure everything regarding shares in the business is written in there, along with who can draw what, and the agreed protocol for dissolving the partnership if needs be. Dissolution is the time when it can all get nasty otherwise.

One bit of advice that has always stuck in my mind, was told to us by our family solicitor before we signed anything. He said that if we needed to refer to the partnership agreement, then there was no partnership. He wasn’t wrong, but I’m very glad that agreement was in place in my circumstances a few years ago.

 

[Worsall]

I understand the reason to set up a partnership adding younger members, but not adding older investors. Why create a partnership, full of potential grief, will restrict your current decision making and lead to inevitable interference. If you want to expand, and parents are happy to support you both, set up a loan from them, a very simple legal agreement.

 

[dairyrow]

set up another share farming business as a seperate enterprise. I wouldn't give away your assets and decision making abilities so easily. They might want a say in how you run it.

 

[betweenthelines]

Just make sure you remain the decision maker, whatever it says in the Agreement!

Even if (or especially if) the in-laws know sweet FA about farming, they'll be making "helpful" suggestions before you know.
it. My FIL was a Project Manager for a building firm that built hospitals and supermarkets, I couldn't even hang a gate without getting detailed instructions about how it should be done. Then he'd get the hump when I didn't do it his way.

If I'd done things his way, I'd have been bankrupt in a week!

 

[Tubbylew]

Someone once told me "a partnership is a sinking ship". When i was younger and greener, and wanted to get a start at farming i was really upset that my father wouldn't go into partnership with me, as his father did with him. But with the benefit of hindsight, he was absolutley right, we've avoided some of the rows he had with his father, and I'm beholden to no-one if circumstances change (as they always do.) Everyone is different, and only you know if you get on well enough with your in laws to be contented in the long term. Tread carefully.

 

[7610 super q]

Me no likey.

 

[Formatted]

This is all good advice and we've considered all of this but does underline the need for good communication and a formal agreement, various reasons as to why we think it'll work and does help my wife is an only child. In-laws are non-farmers, we'll be the day to day decision-makers with big decisions decided via vote with tame consultant used as a tiebreaker.

 

[ollie989898]

For Godsake be careful, I've known partnerships to go sour. It's all well and good when times are good but when suddenly it won't stop raining everyone gets itchy feet.... Would not wish financial trouble on anyone but family troubles can be even worse. Is not a limited company a better option these days, each 'player' puts in an initial investment?

 

[organicguy]

Make sure the agreement is written such that it can continue with remaining partners if one dies, saved a lot of grief with paperwork when father died.
keep it as simple as possible.
do your in laws realise they will be responsible for your debits?

 

[Smith31]

Never do business, or lend/borrow tools and machinery off friends and family

 

[Tubbylew]

This is all good advice and we've considered all of this but does underline the need for good communication and a formal agreement, various reasons as to why we think it'll work and does help my wife is an only child. In-laws are non-farmers, we'll be the day to day decision-makers with big decisions decided via vote with tame consultant used as a tiebreaker.

Just be careful is all, my in-laws are also non-farmers, and they've been probably more supportive, in a lot of ways. But they still have an opinion on we should be doing despite getting most of their information off farming today, and being vegan.

 

[Kidds]

I have been in a family partnership for decades and it all works well. The partnership agreement covers pretty much all eventualities even though it is a very concise document. It only gets brought out to settle disagreements and by that I mean it covers the issue so says what the outcome has to be. It can be varied by mutual consent but still there as a guide.

Having said all that I wouldn't contemplate entering into what you describe. Our partnership served to introduce the next generations into the business rather than introduce older busybodies that have no idea what the job is about. Sorry to sound harsh but that is essentially what you are doing.

 

[DieselRob]

What are they bringing to the partnership? Is it money or assetts/ability to help with the expansion? Are you going to need permission of all the partners to make day to day decisions? Worded incorrectly it could become as restrictive as a noose round the neck

 

[dudders]

Currently in partnership with my wife on our tenanted farm we're looking at expanding and going into partnership with my wife's parents. We are taking professional advice but does anyone have any common pitfalls, generic advice on how to ensure the success and longevity of the partnership?

Yes - generic advice:

Don't do it. Don't do it. Don't do it. Don't do it. Don't do it.

Hope that's clear enough...

 

[Formatted]

To all those saying don't do it, how do you suggest you find the best part of half a million to invest when your assets are already leveraged?

 

[chaffcutter]

I would investigate other terms of being able to take advantage of the offered capital without a partnership, a loan agreement could be written to be advantageous to both sides perhaps.
If you do go into a partnership, make sure that if/when a partner dies, the remaining partners can carry on without the bank closing the partnerships trading account. This happened to me when mum died and it was very unhelpful to say the least!

 

[dudders]

Presumably you're going to buy more assets with this money, and with the amount required it must be land. So use that as the security and go to the usual sources. Keep family out of it.

If your in-laws really want to do something to help, they could buy the assets and rent them to you, or appoint you as manager. Peppercorn rent - their return would be increased land value, or just the satisfaction of helping the family. But you must understand that there's so much scope for trouble that it's still a risky way forward. You could lose your in-laws and even your marriage - it does get that bad.

Also beware of expansion if it's not with your own money. It's brought many a business to a deeply sticky end. If you're already in debt, then taking on more debt could be unwise, unless you absolutely know your sums are right and they've been checked independently. Only if things are going well already should you look at expanding. If business is not good, don't think that expansion will necessarily improve it. Take care!

 

[DrWazzock]

I would investigate other terms of being able to take advantage of the offered capital without a partnership, a loan agreement could be written to be advantageous to both sides perhaps.
If you do go into a partnership, make sure that if/when a partner dies, the remaining partners can carry on without the bank closing the partnerships trading account. This happened to me when mum died and it was very unhelpful to say the least!

same happened here. I had to set everything up with a new bank in two months, despite having a partnership agreement that continued beyond death of parents.