Forming a family partnership

[Chae1]

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?

Bank?

Moneys cheap still.

 

[DrWazzock]

I’d be very wary, nay, dead against going into partnership with in laws.

 

[essexpete]

The OP has not mentioned the ages of the relevant parties or their current occupations and business experience. Suppose the question had be posed by one of the in-laws?

 

[betweenthelines]

Be better making it an interest only loan. The interest you pay them will be less than you'd pay a bank and more than a bank would pay them.

If you go into partnership, who are the In Laws going to leave their share to? This could lead to more problems if they leave it to your kids and one want to farm while another wants to cash in their share.

I know from bitter experience that family means sweet FA when money is involved.

 

[xmilkr]

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

DITTO !!!

 

[Top Tip.]

Family partnerships can be very successful when they work but the vast majority don’t work and end in tears , as an aside and none of my business but the fact that they are vegan would make me run for the hills because to have a lifestyle like that you have to have strongly held views and beliefs which will in most cases interfere with your decision making.

 

[FIL46]

Think long and hard about this one I would say, if you all get on well and have the same views it could be the best thing you have done . Or you are just pulling the pin on a grenade and waiting for it to blow

 

[Lazy-Farmer]

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?

If it’s to buy land I’d suggest let them buy it and you rent it off them. If you/your wife are to inherit assets anyway better to do it that way as you are simply renting more land. Land that you may get in the end anyway. If it’s other kit like sheds or fixed equipment I’d question what they will get out of a partnership. If you can’t get a loan for it or something from traditional sources then its likely because it’s not viable.

Better to either let them buy whatever it is and rent it if it’s land or on wheels or simply borrow the money in a loan deal.

I would not borrow from family like that unless I had a gun to my head personally. The bank is so cheap and if I can’t justify it with a business plan to them I should probably not be investing in it.

Thats me saying this as somebody who is in two partnerships with family as the younger generation. Both are fine and a way of transferring for retirement.

On a more practical note I’d say make sure everyone has a prenup or postnuptial agreement limiting the access to business assets. It’s not worth loosing your business because you can’t find 25% of the value to pay out a member because they couldn’t keep it in their pants. Everyone cocks up from time to time and nobody wants there farm sold because there father-in-law got it up the wrong person!

 

[chipchap]

......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.

That was some very sound advice.

It is also a good idea to have a documented agreement in case a partner dies, to avoid the standard rules in the partnership legislation that lead to the partnership being wound up on the death of a partner.