Farming Partnership Agreements are legally binding documents that set out the ownership of farm business assets, and the responsibility, accountability and role of those partners within the farming business.
Why are they important?
Without a Partnership Agreement, a farming partnership (which is created automatically when 2 or more people decide to farm together to make a profit) is regulated by the Partnership Act 1890.
This isn’t ideal, as it automatically gives all partners equal voting rights, equal accountability for profits and losses, and equal shares of the profits. If a partner dies, the partnership must dissolve, and this can have negative tax implications. And if a new partner wishes to enter, consent must be unanimous.
Each family farming business is unique, and the nature of how partners often work and live side-by-side, along with their emotional attachment to the land, can cause stress and disputes. Therefore, a Farming Partnership Agreement is almost essential.
Setting Up and Managing Farming Partnerships – A Practical Guide for UK Farms
With rising costs, increased regulation, changing support schemes and intergenerational change, it’s never been more important to get your farm business structure right.
For many rural businesses, partnerships remain the most common way of working, often between parents and children, siblings or long-standing collaborators. But too often, they’re based on informal agreements or outdated documents. If that sounds familiar, it’s time to act.
What Is a Farming Partnership?
A farming partnership is a formal business arrangement between two or more people who agree to share responsibility for running the farm, including:
- Ownership of assets (e.g. land, machinery, crops)
- Sharing of profits and losses
- Decision-making and management roles
- Liabilities and tax responsibilities
It can be flexible and tax-efficient but only if it’s structured correctly.
Setting Up a Farming Partnership – What You Need
A successful partnership starts with clarity. Key components of setting up a partnership include:
1. Partnership Agreement (FPA)
This legal document outlines how the business will operate. It should include:
- Names of the partners
- Business name and registered address
- Start date and duration
- What each partner brings (capital, land, labour, etc.)
- Profit-sharing ratios
- Decision-making process
- Banking arrangements
- Procedures for retirement, death or disputes
- What happens when a partner exits
Without a formal FPA, the partnership defaults to the 1890 Partnership Act which is almost always unsuitable.
2. Asset Ownership Records
It’s essential to clearly record what’s owned by the business and what remains in personal ownership, especially land and buildings. This is crucial for tax, legal liability and succession planning.
3. Business Bank Account
A separate partnership account helps with transparency and financial control.
4. HMRC Registration
The partnership must be registered for tax purposes and each partner must file their share of profits via self-assessment.
Managing a Farm Partnership – Best Practice
Once the partnership is up and running, good management is key. Here’s what we recommend:
- Review the FPA every 3–5 years (or sooner after a major event like retirement, death, or succession)
- Hold annual meetings to review performance, accounts, objectives and roles
- Keep clear financial records and ensure partners understand them
- Regularly review succession plans and inheritance implications
- Use written minutes and action points to reduce ambiguity and manage expectations
How Sentry Can Help
Sentry supports family farms and rural businesses across the UK. As an employee-owned business, we understand the importance of long-term, sustainable partnerships and we take the same care with your business as we do our own.
We offer:
- Independent guidance on forming and reviewing farm partnerships
- Tailored advice on asset ownership and tax structure
- Collaboration with your existing accountant and solicitor
- Practical support for partnership disputes or restructuring
- Succession planning aligned with your long-term goals
Whether you’re starting a new arrangement or updating an old one, we’ll work with you to protect your business, your family relationships, and your future.
#TimeToAct
A formal, well-run partnership isn’t just a legal requirement, it’s the foundation of a successful farm. It can reduce risk, improve resilience, and make difficult conversations easier.
Contact us e: enquiries@sentry.co.uk
t: 01473 658058 w: sentry.co.uk
How to create a Farming Partnership Agreement
Basic templates are available online, but they often come with hidden costs, and their generic nature might not be fully appropriate for your complex business.
Seeking legal advice might seem expensive, but it will potentially save you a lot of money and stress, and many solicitors offer a free, no obligation initial chat, and will outline likely costs before you begin the process.