Get in touch
Essential succession planning and partnership legal advice for your farming business
What are Farm Partnership Agreements?
Partnership agreements set out in writing the relations between parties maintaining or developing a business. Unlike other business agreements, the nature of a partnership is often a personal, as well as a commercial relationship. It should cover contributions to capital, profit/loss distribution, voting rights, dispute resolution procedures as well as what is to happen on the retirement or death of a partner.
Why are Farm Partnership Agreements Important?
Most importantly, with land prices rocketing recently, the need to protect the value in land is more important than ever. This will only increase as the opportunity to diversify or develop land is set to increase with the changes in planning legislation. With increases in financial value inevitably come increases in disputes, even (and some would argue, especially) within families.
A properly drafted partnership agreement is a good way to manage expectations and reduce potential for conflict in your farming business.
In terms of tax, it is important to gauge what land is partnership property as opposed to the personal property of individual partners. This is because partnership property will be eligible to 100% Business Property Relief (BPR), whilst farmland merely made available for use by a partnership will only attract 50% BPR relief for Inheritance Tax purposes. Care must be taken, however, as a poorly drafted partnership agreement may lead to all business property being lost if the pre-emption rights (the rights of existing shareholders to have first refusal on the issue of new shares) in the agreement are not correctly drafted.
A partnership agreement is very much like a Will for a business; it needs to be updated from time to time as circumstances change, just like Wills.
Battens Solicitors takes a holistic view of all matters that can affect your farming business. Why not get in touch to ensure that your succession plans are carried out smoothly and in the most tax-efficient way possible?
