10th July 2024 ❘ Legal News and Commentary

Agribusiness FAQs – What is a partnership asset?

Agribusiness FAQs – What is a partnership asset?

Over the years, Farming Partnerships have become significant asset-holding structures and it is not uncommon to see valuable assets being held within a partnership. A partnership asset can be anything that is used by the farming partnership: the farm, additional land and property, vehicles, entitlements, rental income, wind turbines etc.

The term ‘partnership asset’ should be used carefully and only after discussions with your lawyer and accountant. Once an asset is contributed to the partnership, it will become a partnership asset for the duration and cannot be taken out of the partnership. All partners have an interest in all of the partnership assets, and must hold and use them only for the partnership business.

It is becoming increasingly important for partnership assets to be specifically referenced within agreements so as to ensure individual assets do not inadvertently become assets of the partnership business. It is particularly important to set out expressly within the partnership agreement the partners’ decisions about the ownership and use of the more valuable assets.

If the partnership agreement is silent about ownership of assets, the partnership accounts will often be used to clarify whether assets belong to the partnership. However, it is not 100% conclusive that an asset is owned by the partnership just because it sits on the balance sheet. It will be the presumption, but can be disproven.

We are often asked to reference the existence of a Capital Property Account within a partnership agreement in order to protect individual interests that are connected to assets sitting within the partnership accounts.

We would recommend all of our clients, past, present and future, to put a formal partnership agreement in place.

If you’d like further advice on partnership assets or other Agribusiness matters, you can contact our Agribusiness team here.