Farm Partnerships and Succession
A partnership form of business is an arrangement involving shared roles and shared profits among all partners. Intra-family partnerships are the most common type of farm partnership. Families use this as a way of introducing their heirs or successors to the family farming business.
A similar type of agreement comes in handy when two or more farmers wish to combine their farm enterprises into one larger farming business. Such partnerships are formed regardless of the type of farming as the partners focus on improving their resources. For instance, financial input, labour as a resource and business flexibility.
Principles of a Successful Farm Business Partnership
A partnership will likely be successful if all partners keep and adhere to the set principles for running their farm business. Some of these principles include;
- Clearly structured farm business agreement
- Effective communication, trust, and transparency among the partners
- Respect and equality among the partners
Financial Benefits of Farm Partnerships in Ireland
To increase the rate of farm partnership formations and operations in Ireland, the Irish government introduced incentives for such partnership business enterprises. The incentives include:
The revenue of farm partnerships is usually not subject to taxation because individual partners are liable for taxes accredited to their income. Profits acquired in partnerships are shared at the end of every taxation year and divided according to the agreed profit-sharing ratio as stipulated in the partnership agreement. Each partner ends up making distinct income tax returns. As a result, partners are exposed to the following taxation benefits;
- Access to young trained farmer stock relief for farmers under 35 years.
- Maximized low rate at 0% income tax band
- Access to enhanced Stock Relief for parents
- Farm Partnership Successions
At least one member of the farm partnership (to be defined as the “Farmer”) must have been engages in the trade of farming on farm land owned or leased by that person. This land must be at least 3 acres is useable farm land and be farmed by then for at least 2 years immediately preceding the date of formation of the partnership.
At least one other person in the farm partnership (to be defined as the “Successor”) must have an appropriate qualification in agriculture as specified in the Regulations. The Partnership office will require the registration of the business plan. A Succession Agreement must be entered into between the parties.
The Successor should ensure that they receive full legal advice as to legal title of the property they will be acquiring. They should ensure that they are aware of any burden, charges or mortgages affecting the property as well as any leases of easements or rights of ways which may affect.
For land which has a mortgage registered against it, the lending institution will likely require that a new mortgage be entered into. All parties should obtain legal advice in relation to all mortgages and guarantees affecting the land.
Measures mentioned under the Common Agricultural Policy reform of 2014 consist of several incentives benefiting registered farm partnerships. These benefits include the Young farmers national reserve and the Young farmers scheme.
Forming a farm partnership
A Farm Partnership includes all parties that are actively involved in the day to day running of farm activities. All farmers can enter into partnerships if they develop the interest. Farm partnerships can be formed under the following circumstances:
- A farming family having younger family members succeed the parents
- Two or more farmers joining their separate businesses to become one
- A farmer with no successor partnering with a young trained farmer whose dream is to venture into the farming business.
Want to Get More Advice?
Are you in Wexford, Kilkenny, or Waterford and looking for a good farm partnership or succession advice? Your satisfaction is always our priority. We are guided by the highest standards of honesty and integrity. Speak to Frank Halley and Fiona Ormond who deal with our farm partnerships and succession.
Contact us today to get a free quote.