What is a registered farm partnership?
A registered farm partnership is a partnership that is registered with both Revenue and the Department of Agriculture. It is in effect a business structure where two farmers enter into a profit sharing agreement that is supported by a capital account structure, which forms the basis of its dissolution procedure.
How many farming partnerships are currently registered in the country?
There are currently 2,253 partnerships on the Department’s partnership register. Since 2015, the number of partnerships has grown by approximately 410 per year.
When does it make most sense to form a registered farm partnership?
In terms of timing, the best time of year to begin work on the partnership formation is in the autumn, with a view to having all the various pieces in place by the end of February the following year. This year’s deadline is the 28 February 2019.
This is to avoid any issues with herd number transfers and knock on effects on Basic Payment applications.
From a tax perspective, it also makes sense to begin the partnership from the beginning of the next tax year which for most farmers ties in with the beginning of the calendar year.
If the partnership is within a family, the partnership should form part of an overall family succession plan where the partnership is used as a structure to bring the farming successor into the farm business in a formal way.
Where two farmers are thinking of working together and combining their land and labour resources, the timing of formation is the same but the preparation work can take anything from six to 12 months depending on the individuals involved and how determined they are to form the structure.
What are the main types of partnerships, is it all family situations or can two separate farmers form a partnership?
The bulk of the partnerships on the Department’s register are within family between parents and a son or daughter or between a husband and wife.
The remaining partnerships are between two farmers or between a farmer and a farm manager.
Farm partnership is a good structure for farmers who do not have a farming successor of their own to collaborate with, a young trained farmer who has no farm to inherit, or with a person from outside of farming to gain access to land and other resources on which to farm.
What benefits do a registered farm partnership bring for both parties?
The first benefit is that the partnership provides a good, robust business structure with clarity from a legal and taxation perspective and with a good exit strategy built in.
In terms of succession, the structure is very beneficial for the development of the successor.
It allows the successor to grow gradually into the role of farmer and to gain confidence in dealing with all aspects of running the farm business.
It also recognises the input of the parents and what they bring to the arrangement in terms of work, knowledge, experience and support of their successor.
How many people can be involved in the partnership?
A registered farm partnership can have up to 10 partners. However, the more partners that are involved the more complex the dynamics become between the various partners.
What is the difference between a company and a registered farm partnership?
A partnership is a profit sharing arrangement between two individuals who are in business together, it is not a separate legal entity.
A limited company is a separate legal entity known as a legal person in the same way as individual people are separate legal entities in their own right known as natural persons.
Therefore a company can become a partner in a registered farm partnership, provided it meets the criteria of having farmed at least three hectares for at least the two previous years, in the same way as any individual farmer.
A company pays tax at the corporate rate in its own right and its directors pay personal tax on their drawing/salaries from the company.
A partnership does not pay tax in its own right.
The net profit of the business is split between the partners and they pay tax on their share of the net profit in the same way as sole traders.
What’s involved in forming a registered farm partnership and how much does it cost?
The partners must create a partnership bank account, change the herd number into the name of the partnership and complete the legal template partnership agreement.
Copies of folios and leases along with education certs must be provided as supporting information.
Farmers are advised to consult with their agricultural advisor, accountant and solicitor during the formation of the partnership.
The cost varies depending on the professionals that you are dealing with, but there is a 50% grant available on successful registration towards the set up costs of the partnership.
When forming partnerships, how are the shares of fundamental elements of the business decided on i.e labour input, stock, inputs, profits?
The partners should complete an on-farm agreement to create a work structure that is fair to all and designed to get through the work on the farm efficiently. There are three key areas to this document.
They are: areas of responsibility, decision making roles, time off and holidays, salaries and drawings. It is good practice for partners to have a weekly meeting to plan out the tasks and work to be carried out for the week ahead to give everyone clarity in their roles. Decision making must be shared.
Land, buildings, Basic Payment Scheme entitlements and any other assets are licensed into the partnership (a permission of use by the owner).
Stock, machinery and working capital are contributed by each partner and the value of these is recorded in a separate capital account for each partner.
The value of these assets may be used along with the proportion of land to establish a relativity between each partner and can form the basis of a profit sharing ratio.
The capital account must be updated each year to reflect any changes in the capital position.
These accounts will be central as the basis for dissolving the partnership at the end of its lifetime.
Case study: Sean Treacy
and Kieran Fitzgerald
Ballybeg, Littleton, Thurles, Co Tipperary
Sean Treacy and Kieran Fitzgerald formed a registered farm partnership in 2016. Up to that point, Sean had been farming on his own milking 70 cows. He also had a breeding bull enterprise.
With the removal of milk quotas, Sean’s plan was to increase cow numbers. However, with expansion he felt more help would be needed. “After visiting a dairy farm in Louth operated by a partnership I thought to myself that is the way to go,” he said.
Kieran Fitzgerald is a qualified farm manager and spent years working on farms before switching to mining as a career. He worked in a zinc mine for 15 years before the mine closed in 2015.
They are not strangers – Kieran lives close by and they are relations through marriage.
He had milk recorded on the farm in the past and done relief milking for Sean over the years.
Sean Teacy and Kieran Fitzgerald, Ballybeg, Littleton, Thurles, Co Tipperary.
A conversation between both men’s wives was the spark that led to the formation of the partnership.
“I was looking at finding another mine to work in, somewhere else in Ireland or abroad at the time,” Kieran said.
Both men sat down and discussed the idea and decided a registered farm partnership was the way to go. They got advice from Teagasc and their accountant helped fill out the forms.
This spring, 150 cows are due to calve down. To accommodate the higher numbers on the 55-acre grazing platform, extra grass will be brought in with a zero-grazing machine from outfarms.
With two people working towards an agreed goal, stress levels have gone down. After the busy spring period they both take every second weekend off, which was impossible for Sean to do in the past.
Every morning they plan the day’s work ahead and so far both men joked that they haven’t had a row yet. An agreed wage is now paid into each partner’s personal account at the end of every month. Any remaining profits at the end of the year are divided in a 60:40 ratio, with Sean receiving the biggest share as he is the landowner.
The main advice they give for farmers planning something similar is to make sure you are compatible and have similar goals to the other partner. If not, a partnership won’t work.
What is a registered farm partnership?
A registered farm partnership is a partnership that is registered with both Revenue and the Department of Agriculture. It is in effect a business structure where two farmers enter into a profit sharing agreement that is supported by a capital account structure, which forms the basis of its dissolution procedure.
How many farming partnerships are currently registered in the country?
There are currently 2,253 partnerships on the Department’s partnership register. Since 2015, the number of partnerships has grown by approximately 410 per year.
When does it make most sense to form a registered farm partnership?
In terms of timing, the best time of year to begin work on the partnership formation is in the autumn, with a view to having all the various pieces in place by the end of February the following year. This year’s deadline is the 28 February 2019.
This is to avoid any issues with herd number transfers and knock on effects on Basic Payment applications.
From a tax perspective, it also makes sense to begin the partnership from the beginning of the next tax year which for most farmers ties in with the beginning of the calendar year.
If the partnership is within a family, the partnership should form part of an overall family succession plan where the partnership is used as a structure to bring the farming successor into the farm business in a formal way.
Where two farmers are thinking of working together and combining their land and labour resources, the timing of formation is the same but the preparation work can take anything from six to 12 months depending on the individuals involved and how determined they are to form the structure.
What are the main types of partnerships, is it all family situations or can two separate farmers form a partnership?
The bulk of the partnerships on the Department’s register are within family between parents and a son or daughter or between a husband and wife.
The remaining partnerships are between two farmers or between a farmer and a farm manager.
Farm partnership is a good structure for farmers who do not have a farming successor of their own to collaborate with, a young trained farmer who has no farm to inherit, or with a person from outside of farming to gain access to land and other resources on which to farm.
What benefits do a registered farm partnership bring for both parties?
The first benefit is that the partnership provides a good, robust business structure with clarity from a legal and taxation perspective and with a good exit strategy built in.
In terms of succession, the structure is very beneficial for the development of the successor.
It allows the successor to grow gradually into the role of farmer and to gain confidence in dealing with all aspects of running the farm business.
It also recognises the input of the parents and what they bring to the arrangement in terms of work, knowledge, experience and support of their successor.
How many people can be involved in the partnership?
A registered farm partnership can have up to 10 partners. However, the more partners that are involved the more complex the dynamics become between the various partners.
What is the difference between a company and a registered farm partnership?
A partnership is a profit sharing arrangement between two individuals who are in business together, it is not a separate legal entity.
A limited company is a separate legal entity known as a legal person in the same way as individual people are separate legal entities in their own right known as natural persons.
Therefore a company can become a partner in a registered farm partnership, provided it meets the criteria of having farmed at least three hectares for at least the two previous years, in the same way as any individual farmer.
A company pays tax at the corporate rate in its own right and its directors pay personal tax on their drawing/salaries from the company.
A partnership does not pay tax in its own right.
The net profit of the business is split between the partners and they pay tax on their share of the net profit in the same way as sole traders.
What’s involved in forming a registered farm partnership and how much does it cost?
The partners must create a partnership bank account, change the herd number into the name of the partnership and complete the legal template partnership agreement.
Copies of folios and leases along with education certs must be provided as supporting information.
Farmers are advised to consult with their agricultural advisor, accountant and solicitor during the formation of the partnership.
The cost varies depending on the professionals that you are dealing with, but there is a 50% grant available on successful registration towards the set up costs of the partnership.
When forming partnerships, how are the shares of fundamental elements of the business decided on i.e labour input, stock, inputs, profits?
The partners should complete an on-farm agreement to create a work structure that is fair to all and designed to get through the work on the farm efficiently. There are three key areas to this document.
They are: areas of responsibility, decision making roles, time off and holidays, salaries and drawings. It is good practice for partners to have a weekly meeting to plan out the tasks and work to be carried out for the week ahead to give everyone clarity in their roles. Decision making must be shared.
Land, buildings, Basic Payment Scheme entitlements and any other assets are licensed into the partnership (a permission of use by the owner).
Stock, machinery and working capital are contributed by each partner and the value of these is recorded in a separate capital account for each partner.
The value of these assets may be used along with the proportion of land to establish a relativity between each partner and can form the basis of a profit sharing ratio.
The capital account must be updated each year to reflect any changes in the capital position.
These accounts will be central as the basis for dissolving the partnership at the end of its lifetime.
Case study: Sean Treacy
and Kieran Fitzgerald
Ballybeg, Littleton, Thurles, Co Tipperary
Sean Treacy and Kieran Fitzgerald formed a registered farm partnership in 2016. Up to that point, Sean had been farming on his own milking 70 cows. He also had a breeding bull enterprise.
With the removal of milk quotas, Sean’s plan was to increase cow numbers. However, with expansion he felt more help would be needed. “After visiting a dairy farm in Louth operated by a partnership I thought to myself that is the way to go,” he said.
Kieran Fitzgerald is a qualified farm manager and spent years working on farms before switching to mining as a career. He worked in a zinc mine for 15 years before the mine closed in 2015.
They are not strangers – Kieran lives close by and they are relations through marriage.
He had milk recorded on the farm in the past and done relief milking for Sean over the years.
Sean Teacy and Kieran Fitzgerald, Ballybeg, Littleton, Thurles, Co Tipperary.
A conversation between both men’s wives was the spark that led to the formation of the partnership.
“I was looking at finding another mine to work in, somewhere else in Ireland or abroad at the time,” Kieran said.
Both men sat down and discussed the idea and decided a registered farm partnership was the way to go. They got advice from Teagasc and their accountant helped fill out the forms.
This spring, 150 cows are due to calve down. To accommodate the higher numbers on the 55-acre grazing platform, extra grass will be brought in with a zero-grazing machine from outfarms.
With two people working towards an agreed goal, stress levels have gone down. After the busy spring period they both take every second weekend off, which was impossible for Sean to do in the past.
Every morning they plan the day’s work ahead and so far both men joked that they haven’t had a row yet. An agreed wage is now paid into each partner’s personal account at the end of every month. Any remaining profits at the end of the year are divided in a 60:40 ratio, with Sean receiving the biggest share as he is the landowner.
The main advice they give for farmers planning something similar is to make sure you are compatible and have similar goals to the other partner. If not, a partnership won’t work.
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