Over the years we have been involved with a number of farming businesses where the partners’ circumstances have changed, and they need to dissolve a long-standing partnership. In a small number of cases this can cause no end of heart ache between family members. Often the situation appears to the family to be complex and with long memories, the situation can become acrimonious and in the worst cases deteriorate into serious legal costs.
To the professional outsider the situation is normally resolvable by following a well understood and logical process with reduced costs and with the wishes of the partners being achieved.
Passing the business onto the next generation is an issue for many farming families and one which, for a number of reasons, has become increasingly difficult. Businesses have grown, and values have risen and at the same time society has, in general, moved in the direction that siblings should be treated more fairly.
Historically the answer was to introduce the children into the partnership. Today this is not always appropriate and other methods need to be found to reward and involve the next generation or younger outsiders in the business.
We are seeing families consider a number of options ranging from simple agreements for services to full blown contract farming agreements and farm business tenancies. The contract farming agreement is probably the most popular as they are normally easiest for the parties to understand and can be kept simple. The range of services offered can include labour machinery and, in some cases, hire of breeding livestock.
Share farming agreements are similar in structure but the profits are shared to reflect the capital invested in the business. Whether it is a share farming or contract farming agreement, a key objective is to maintain the farmer’s working farmer status whilst reducing the risk to the business.
If you would like to discuss any of the issues raised above, please contact William at email@example.com or your local FCG office.