It is common practice for farming businesses to be run as legal partnerships between the owners. When setting up this type of business, it’s prudent for the parties to enter into a Partnership Agreement. A Partnership Agreement is a legal document that sets out the rules for the operation and regulation of the partnership and mitigates risk should changes occur.  

Without a Partnership Agreement in place, you are subject to default rules of the Partnership Act 1890. The terms of the 1890 Act can come as a surprise to partners, such as the automatic dissolution of the partnership when any one partner dies. Parties are therefore advised to put a bespoke Partnership Agreement in place which is tailored to their specific needs.

What should a Partnership Agreement cover?

Split of profits and losses

It should set out how the profits (and losses) are to be divided between the partners.  It should also state when the profits can be extracted and when any losses need to be made up.  The 1890 Act provides that profits and losses are to be shared equally between the partners but that may not reflect the contributions or intentions of the parties. For example, one partner may carry out more work on the farm and there may be an agreement that the person shall receive a higher split of the profits.

Decision making

It should regulate the how decisions are made within the partnership.  It is usual to draw a distinction between matters that arise in the ordinary course of the business (a simple majority vote should be sufficient here) and matters that are outside the ordinary course of the business or of material importance (for which a unanimous vote may be required).  For example, the purchase of equipment for under an agreed figure may require a majority vote whereas the purchase of equipment over the agreed figure may require a unanimous vote.

Fundamental Changes

Any fundamental change in the partners’ circumstances may trigger a dispute within the partnership. This could include the death of a partner, a divorce between the partners, or a ‘falling out’ between the partners.  A Partnership Agreement should set out what will happen in such events.  The certainty of an agreed procedure if such events arise should help reduce the stress that may follow.  

Business Continuity

On death, the remaining partners would usually want the partnership to continue rather than coming to an end. Continuity of the business is important and helps avoid any unintended tax consequences for the partners.

The Partnership Agreement should also set out the procedures and terms for making payments to a departing partner (whether the departure is caused by their death or otherwise).  These terms can be challenging because the terms need to be fair to all parties in addition to enabling sufficient time to raise any funds required to pay the departing partner.

What are Partnership Assets?

It is important to be clear about which assets belong to the partnership and which assets belong to the individuals.  For example, farmland might be owned by the individuals even though the farm is operated by the partnership.  If this is not clearly set out in the Partnership Agreement, it can cause all sorts of difficulties if a dispute arises at a later date. 

Compatibility with partners’ existing Wills and title deeds

Lastly, it is important to ensure that the Partnership Agreement aligns with the Wills of the individual partners.  It is also important to check that the title to the farmland complies with the terms of the Partnership Agreement.  These checks should not be difficult to carry out.

Review of Partnership Agreement?

We recommend that the Partnership Agreement should be reviewed every 3-5 years to ensure it reflects any changes in circumstances and corresponds to any changes in how the partnership operates in practice. 

There is little point having an old dusty Partnership Agreement in place if the partners no longer comply with its terms.  


A Partnership Agreement cannot guarantee the success of the agricultural business.  However, it should help the individual partners take comfort from knowing what their rights and responsibilities are and what will happen if certain major changes take place within the partnership.

We would be happy to help put in place a Partnership Agreement and review any old Partnership Agreements so please do not hesitate to get in touch with us at, and find out more about our corporate legal services here.

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