Farming with other people – friends, business partners, romantic partners – can be very fun and very beneficial. But, partnering up can also come with some challenges, legal and otherwise.
Many farmers and ranchers feel the personal liability risks of a General Partnership are too great, and will take the opportunity to form a business structure. If this concerns you, read Chapter 3 of the Farmers’ Guide to Business Structures, titled Sole Proprietorship and General Partnership Fundamentals (26pgs.). In this guide, you’ll learn about these business structures including the inherent benefits and risks of partnerships. For example, partnerships can require less paperwork BUT they do not offer personal asset protection. If you don’t want to be personally responsible for your partner’s actions, read up on forming a separate business structure in the pathway for I’m not sure which business structure is the right one for my farm/ranch. Where do I start?
Working with others also increases the risk that disagreements will cause intractable problems for the farm business further down the road. You’ve heard the stories… fights about debt loads, mismanagement of budgeting, unclear communication causing stress… There is a solution. Although it’s often not legally required, we can’t stress enough the importance of a thorough governance document in preventing these types of problems before they harm the farm or ranch business (and the personal relationships of those involved). No matter the business structure chosen, write a partnership agreement, operating agreement, or bylaws that address the unique needs of the businesses and people involved. Learn how in the Farmers’ Guide to Business Structures. Complete with detailed checklists and annotated model operating agreements and bylaws, get ahead of problems and create true resilience for your shared venture.