Is it time to think about a farm partnership?

Dear Reader,

A Farm Partnership arises when two or more farmers combine their farming operations into one business. Most often, Farm Partnerships are formed between family members as a stepping stone to the ultimate transfer of farm ownership to the next generation.

A registered family Farm Partnership is one possible option to consider as part of the succession planning process. Parents may have different reasons for delaying the transfer of the farm to a child, and these reasons often revolve around concerns such as family farm income and security for the parents and other family members who still have to be provided for.

In a registered partnership, the parents do not give up control of the farm; they share it with the son or daughter. They retain ownership of the assets, such as land, buildings and entitlements and the assets are licenced for use by the partnership, but only for the duration of the partnership. Assets such as stock and machinery are transferred to the partnership, and, as a result, they become partnership assets.

The partnership allows parents the opportunity to see how their child will adapt to the partnership to utilise their agricultural training and knowledge on the farm while working on the farm with shared decision-making and management. It will also allow the parents to retain some control over the farm and to share their experience and knowledge with their future successor.

It is a transition arrangement to steer the family farm through the succession process until the full farm transfer to a child at a later date takes place. It allows for gradual introduction of the successor in a formal way into the farming business over the lifetime of the arrangement.

It is a matter of critical importance to have a well-drafted partnership agreement which clarifies precisely how the partnership will be formed, operated and dissolved.