Top tips for perfecting farming partnerships

FG Insight - Ben Pike

Type: Article
Knowledge level: Intermediate

Farm Table says:

Handy article that presents top tips for what to include in a partnership agreement.

This article draws on the insights of John Rouse, and American farms and estates partner at Wright Hassell. It is particularly relevant for new entrants wanting to use a partnership agreement – very popular in agricultural businesses – to get a start in farming.

“Partnership agreements need to be done properly and reviewed every time major decisions are made about the farm.”

Rouse’s top tips to include in a partnership agreement include:

  • What each party is bringing to the table: Every member of the partnership should have details of what they are providing. Examples include land, capital, machinery or labour.
  • A capital share and profit breakdown: What capital does each member of the partnership has and who is entitled to what when profits are shared out?
  • Who is allowed to be involved in outside activities: If parties are allowed to have other business interests, what are they permitted to be involved in? Some partnerships do not allow partners to have any competing businesses and some exclude other business interests entirely.
  • How death and partnership break-ups will be dealt with: An agreement should be structured to set out what happens if someone leaves the partnership. In the event of death, a partnership agreement becomes a legal referral document and becomes extremely important.
  • Consequences of breaching the agreement: In certain situations, partners can be expelled if they do not fulfill their duties in the partnership, breaching the terms of the agreement.
  • Dictate the banking mandates: Decisions need to be made as to the amount of money an individual partner sign off, relating to invoices and other business costs. Who can sign contracts and to what value should also be discussed?
  • How decisions will be made: As with any business, matters which need resolving will have to be discussed and actions were taken. You may want certain issues to require unanimous agreement in the partnership, while on other matters a majority could suffice.
2016 - United Kingdom - FG Insight - Ben Pike
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