Family farm partnerships are extremely common in the agricultural sector. For many farmers, these agreements are loose and undefined. There may even be the assumption that because a long-term partnership is working well for all parties, there is little reason to formalise it in writing.

While there is no legal obligation to set out your farming responsibilities and assets in a lasting document, not doing so can be extremely risky. Because verbal agreements lack detail and clarity, relying on one could have damaging implications for inheritance, tax matters, profit sharing, and more.

So, what are family farm partnerships, and how does putting one in writing offer peace of mind for the future?

What is a farming partnership agreement?

A farming partnership agreement is an understanding between two or more people — often family members — that they intend to operate a rural business together. Although written agreements offer much more legal protection in the event of disputes, farmers often only have verbal agreements. Written contracts offer extra clarity by fully outlining the ownership of assets and land.

It’s important to note that there is no legal requirement for a written agreement to exist between farming partners. This means that solely verbal partnerships would be governed by the Partnership Act of 1890. This legislation might not encompass the realities of modern farming, so would offer limited recourse if the partnership ever came into conflict.  

Setting up a farm partnership — what to include

A partnership agreement will primarily outline the ownership of assets and land within a farming operation. It will also set out what happens to any profits or losses made by the business, and what happens in the event of dissolution. Finally, it should include financial information and the mechanism for making changes to how the business operates.

The following essential information should be included:

  • A full inventory of the partnership’s assets and who owns them
  • An explanation of how any profits and losses relating to land will be handled
  • Details of how profits will be shared and when they can be drawn on
  • Contingency plans regarding the future of the business should a partner die, leave, or request that the partnership be dissolved
  • Plans for who controls bank accounts and the process for how partners will agree to withdraw funds or make investments
  • The mechanism for handling disputes between partners.

Because every farm operates in its own way, there is no set formula for creating a farming partnership agreement. Therefore, if you’re keen to enter into one, it’s important to seek trusted legal advice that is tailored to your unique goals.

What are the benefits of family farm partnerships?

Fully documenting terms and conditions is the easiest way to provide clarity between business partners — and farms are no exception to this. A written agreement minimises the likelihood of protracted disputes, improves your chances of securing credit, and lessens the risk of outdated legislation being applied to the partnership further down the line.  

Family farm partnership agreements make clear who owns what, and how and when profits will be shared. This gives all parties a clear point of reference for the duration of the partnership. They should also outline the process for handling inter-family disagreements, with this framework ensuring that any disputes are resolved more efficiently. 

Without a written agreement, there is a significant risk that the death of a partner could result in the immediate dissolution of the partnership. This would leave the remaining family members liable for any debts and loans. Some banks will even refuse loan applications unless there is a formal partnership agreement in place.  

Dissolving a farm partnership

In the event of a dispute, dissolving a farm partnership could be your only option. The mechanism for this could already be outlined in your farming partnership agreement. Otherwise, it is advisable to find an amicable resolution that works for the partnership. If the collaborative approach is impractical, you would need to apply to the courts for a dissolution.

One of the most common strategies for dissolving a farm partnership is for the remaining partners to buy out another party’s share in the partnership. Following dissolution, assets would be divided in line with the written agreement.

Any attempt to extricate yourself may prove to be complex, especially if the terms of the partnership are not outlined in writing. The involvement of a specialist agricultural solicitor will make it much easier to take stock of your options and reach a positive outcome.

Expert guidance from our farming specialists

Whether you're involved in an informal farming partnership or looking to dissolve a long-standing agreement, getting reliable advice and guidance is crucial. Partnering with a legal and professional services business that truly understands the unique challenges and opportunities of rural life is key to achieving a sound strategy and a successful outcome. 

With extensive experience supporting individuals and rural businesses, our specialist agricultural and rural team is deeply knowledgeable about the industry's intricacies, allowing us to offer targeted advice that addresses your specific issues and ensures a swift, satisfactory resolution. 

We offer comprehensive in-house services, covering everything from family law and estate planning to corporate interests and real estate. This wide offering helps us to provide a service that takes care of everything at the same time.

Because our services are built around you, we take the time to understand your unique circumstances and objectives. Our results-driven team will then create a strategy designed to achieve your desired outcome as smoothly as possible. 

If you are looking for guidance on family farm partnerships, contact us to access a network of over 1000 legal and business professionals ready to provide clear, end-to-end premium services tailored to your needs and region.