Partnership as a means of transferring the business and/or family farm

Friday, June 22, 2018

Succession Planning

When considering how to include the next or multiple generations in a family business or farm there are various concerns that must be addressed including:

• retention of control over the assets/business/farm;
• managing tax liabilities both now and in the future;
• preserving tax reliefs;
• flexibility to manage changing family circumstances such as marriage, divorce, grandchildren, second families;
• flexibility to adapt to changes in business strategy and/or respond to market fluctuations; and
• ensuring sufficient financial provision has been made for each generation.

A structure that has the ability to meet all of the above criteria is a family partnership.  The benefit of a family partnership is that it allows the retention of control of the partnership assets while paying tax at today’s value on any existing assets.   Any increase in value in the assets is attributable to the partners which can include multiple generations.

In broad terms, the general partner has unlimited liability and carries on the management of the partnership business with the limited partners’ liability limited to their contribution.  The partnership agreement can be used to regulate the affairs of the partnership and to accommodate the various intricate family relationships and arrangements that may be required.  There is no restriction as to what a family partnership can be used for and is suited to any form of business including; farming, trading, property investment and also for equity investment.  The key to the success of a family partnership is the correct professional advice and it being set up correctly in the first instance.

Any questions or queries on this topic, please contact Amanda-Jayne Comyn.