Many farms are involved in business arrangements, whether through a partnership (or multi-member LLC), a joint venture, a contractual agreement, or a handshake deal. Farm transition plans often include a business partnership between the generations as an in-between step.
Sometimes, business partnerships just happen, such as a farm family deciding to file a partnership tax return to save on taxes or reduce certain payment limitations. In any case, farm partners are stuck with each other for a while, so how does one cultivate a successful business partnership?
Choosing the Right Soil
The Southern Ag Today article “Before Doing Business Together” outlined considerations to keep in mind before entering a joint business arrangement with someone else. If the business arrangement is intentional, ensure an attorney prepares a legal agreement that spells out everything, especially how decisions are made, how money is handled, and how to unwind the partnership.
Amending the Soil
If things are going well, it is easy to forget that other people are involved in managing your business. But relationships change over time: expectations change, people change, and not always for the better. Sometimes one can inherit a new business partner due to the retirement or death of a previous business partner.
Expectations for a business partner’s performance may have been clearly stated in the past, but a reset may be needed. Ideally, this would involve revisiting and amending the business agreement. At a minimum, a farm business meeting should be held on a routine schedule (at least annually) to discuss expectations and performance among the group.
Getting Rid of the Weeds
Unresolved conflicts, no matter how small, are like weeds choking a business. Unchecked negative feelings can seriously affect business and family relationships. The only way to eradicate these infestations is by resolving the conflict. The responsibility for resolving conflict weighs equally on both parties, the one responsible as well as the one who is upset. Many times, the “offender” doesn’t even know that they have done anything wrong.
Regular business meetings are a great way to stay on top of expectations and resolve conflicts. If neither party can discuss the problem, it may be necessary to use a neutral third-party facilitator to get things out on the table.
Protecting from Diseases and Pests
Protect against further conflict by improving communication and planning techniques between business partners. An old friend, Dr. George Conneman, often spoke about the 7 Cs for family business success: communication, commitment, common objectives, compromise, cooperation, contribution, and consultation.
Knowing When to Replant
All business partnerships end at some point. It is best to have a plan for how this will happen. A properly documented exit plan will ease partnership dissolutions, minimizing the potential for conflict, hard feelings, and courtroom battles.
Resources
If you need personal assistance, Cooperative Extension agricultural agents and specialists have experience, resources, and referrals to help farm families discuss the topics mentioned above. If you would like to learn more about joint business arrangements, download this free workbook.
