Ask The Legal Expert - Going into Business on a small farm
- AuthorAlice Dearden Cobbett
Alice Dearden Cobbett, an Associate Solicitor with JCP’s Rural Practice Team, talks about the importance, for farmers, of making sure they get the groundwork right when entering into partnerships.
My cousin and I are going into business together on a small farm. We have a clear idea of how we will split the responsibilities between us but we want to get the legalities right, so we don’t have disputes down the line. What do we need to do?
Setting up a farm business partnership can be satisfying. However, it is important to lay the correct groundwork when structuring your business. Unfortunately, many business and farm clients seek help once issues have already arisen within a partnership that hasn’t been formalised, and dealing with issues after the fact is more complex than putting safeguarding measures in place before you embark on your venture.
If you are starting a business it is likely that issues will arise at some point. However, these issues will not necessarily put you or your business at risk if you have the protection of a formal, legal agreement that has been drawn up by a legal professional. In these uncertain times this is a particularly important course of action for farm partnerships, where family loyalties often vie for attention with commercial considerations.
A partnership agreement can help you formalise:
- Rights and responsibilities of each partner
- The duration of the partnership and whether partners can be added or removed
- What the business assets are and what contributions are required from the partners
- How decisions between the partners are made
- How the partnership can be ended and who gets what at that time
- What happens when circumstances change
All of these points are important, and, just as with any other business venture, you need safeguards in place in order to avoid disputes that could cost you and your farm dear.
The question posed is based upon a hypothetical situation.