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The Family Business

View profile for Isobel Willoughby
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We see a significant number of clients who are farming in partnership with their family members and, of course, such arrangements frequently run perfectly smoothly. Any reluctance to formalise the family partnership in a written agreement is therefore understandable. Not only must it seem an unnecessary expense, but there is also undoubtedly a fear of having to have difficult discussions with family members.

However, we all too often see the consequences where there is no written agreement in place. Relationships break down and, suddenly, farming families can find themselves trying to deal with difficult problems, without any clear agreement or understanding of how to do so.

Ultimately, the costs involved in resolving issues, and the further strain which such disputes can place on a family, can be far greater than the fees that would have been involved, or the difficult conversations that would have been required, if the family had simply put a partnership agreement in place in the first instance.

Of course, family disputes are not the only good reason for having a written partnership agreement. We understand that succession planning is profoundly important to our farming clients, and we find that they really benefit from our advice in dealing with this vital issue in a written agreement. Even for those of our farming clients for whom succession is not at the immediate forefront of their mind, we urge them to consider making appropriate arrangements in a partnership agreement. Dealing with serious ill health or death in a family is a challenge at the best of times, but it becomes even harder when also having to deal with the uncertainty that arises where succession plans have not been set down in writing.

Even if family relationships never breakdown, and succession takes place without any uncertainty or dispute, there are still significant benefits to having a written partnership agreement in place.  Such agreements can be used for effective inheritance tax planning, and can impact on the ability of the farming business to obtain APR/BPR, to claim for a young farmer supplement, and so on. When preparing partnership agreements for our farming families, our teams work together alongside our clients’ accountants, and specialised agricultural advisors, to ensure that all appropriate legal and tax advice is given.

In the absence of a written partnership agreement, it is worth bearing in mind that a partnership will be governed by legislation dating back to 1890, which provides for profits and losses to be shared equally, creates difficulties in distinguishing partnership property from an individual partner’s property, and automatically dissolves the partnership on the death of a partner. It goes without saying that relying on this archaic statute is irrational when, instead, you can operate under a set of agreed, legally sound, and tax-advantageous terms, agreed by the partners, on the basis of comprehensive professional advice.

If you wish to discuss putting a partnership agreement in place, or any other matter relating to your farming partnership, please feel free to call any of the solicitors in our specialist Agricultural Law department at Crombie Wilkinson at our Malton office on 01653 600070.

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