Farm Partnership Agreements

At The McKinstry Company, we have decades of experience working for and with local farming communities across Ayrshire.  We work with a wide range of clients in the agricultural sector, from large agricultural businesses to smaller family-run businesses, that have been passed through the generations.

We understand that farming is a business model that can be all-consuming, and it can be very difficult to take a step back from the day to day operations and assess the legal and business structures which are in place.

This is where we come in.  As agricultural law specialists, we can advise on the best possible model for your farming business.  Here we explain one of the most common business models for family farms – farm partnership agreements.  If you wish to seek advice on any of the issues discussed here, do not hesitate to get in touch today.  Our expert team is on hand to assist.

What Is a Farming Partnership?

It is very rare that a farm will be run by one individual.  Generally, there will be at least two business partners who are running the business together.  You may not have a formal written partnership agreement, but that does not mean that you are not in partnership.

The Partnership Act 1890 defines what it means to be in partnership. A partnership is “the relation which subsists between persons carrying on a business in common with a view of profit.” Expressly excluded from this definition is a company incorporated under the Companies Act 2006 – so if your business operates as a limited company, this would not fall within the definition of a partnership.

The key elements for a partnership are that:

1. There are two or more (i.e. not just one individual);
2. who are running a business;
3. in common (i.e. together); and
4. with a view to profit.

This will generally apply to family farms being operated by multiple family members.

What Is a Farming Partnership Agreement?

A farming partnership agreement is essentially a contract which sets out the terms of how the partnership will operate.  It is not essential to have such an agreement, but if you do not, then the terms of The Partnership Act 1890 will apply.  These terms are, not specifically tailored to your family dynamic.  In some cases, the terms which apply will be very out of date, given that the Act was passed in 1890 without a view to modern partnership relationships. A partner governed by the act may also mean unintended consequences which may be prejudicial.

We, therefore, recommend employing a solicitor to draft a family partnership agreement.  This agreement can deal with a variety of issues – from how profits are divided to how the partnership will be managed in the event of the retirement or death of a partner (for more information on this element of partnership agreements, see here).  The partnership agreement can also set out how disputes will be dealt with this.  This can be particularly important in family businesses.  Having a clear roadmap for how disagreements are dealt with can prevent controversy or allegations of unfairness, which can be very destructive in a family business.

A well-drafted farm partnership agreement acts as a tool to facilitate a positive, contractual relationship – which allows a business to flourish.

Contact The McKinstry Company Farm Partnerships Agreements Lawyers, Ayrshire

At The McKinstry Company, we put our clients at the heart of our work.  As a firm, we never lose sight of the importance of the client and the outcome which the client seeks from us.

Our goal is to generate and maintain strong and lasting client relationships rather than a transactional approach to the work which we undertake.  We are a law firm for life.

If you want to learn more about farm partnership agreements, get in touch today.  You can contact us on 01292 281711 or via our online enquiry form.  Our friendly and dedicated team are here to help you.