4 steps involved in forming a farm partnership
A partnership is a business arrangement where the profits from that business are shared among the partners in the partnership.
Since 2002, partnerships have been used as a structure to amalgamate two or more farming businesses into one structure, known as inter family partnerships (Between two farm families).
The most common form of partnership is known as intra family partnership (within family), where the partnership is used as a transition arrangement to gradually introduce a successor to the family farming business.
1. Setting up the partnership herd number
The existing herd number or herd numbers (in the case where two separate farms are amalgamating) must be changed into the same name as the partnership and the partnership bank account.
This generally means adding a name or two names to the existing herd number (e.g. David Browne is changed to David, Mary and John Browne).
Changes to a herd number must be made through the local District Veterinary Office (DVO) by completing and submitting one of two forms.
It is important to seek the advice of the local DVO in making changes to the herd number. A note explaining the required changes to the herd number by the partnership set up process should be provided to the DVO.
The forms used are as follows:
- An ER1.1 form should be used where names are added to a herd number provided the registration details and herd keeper are not changing (e.g. Herd Number changing from David Browne to David, Mary and John Browne).
- An ER1 form is required where the herd keeper is changing.
These forms are available from the local DVO office or can be downloaded from the Department of Agricultures website.
Copies of all ER1 and ER1.1 forms submitted to the DVO should be kept on file along with a date stamp or receipt from the DVO as proof that it was submitted.
Amalgamating two herd numbers
In a case where two herd numbers are being amalgamated into one, a separate ER1.1 form must be completed for each herd number to change the name on each respective herd number into the partnership name.
Where one of these two herd numbers is being made dormant (will no longer contain livestock), it is vital to instruct the DVO in writing not to ‘End Date’ this herd number.
It is still required for payment purposes under the Basic Payment Scheme, Area of Natural Constraint scheme, Organic scheme and GLAS schemes.
When is best to change a herd number?
It is important to be aware that if changes are made to a herd number after the Basic Payment Scheme application and amendment deadlines, it may cause delays in the receipt of payments in that year.
This should be discussed with your agricultural advisor. The key window for making changes to a herd number is after basic payments have been received for the current year but well in advance of the Basic Payment Scheme Application period for the following year.
Generally, this means changes should be made between December and the end of February the following year to allow ample time for successful processing of the ER1 and ER1.1 forms by the District Veterinary Office.
Basic Payment Scheme Entitlements
Any changes to the names on a herd number will require a ‘Transfer of Entitlements’ form. If the changes occur before the Basic Payment Scheme deadline, then the transfer form must be submitted before the Basic Payment Scheme deadline.
Where the change occurs after the Basic Payment Scheme deadline, a transfer form will have to be submitted before the BPS closing date in the following year.
2. Setting up the Partnership Bank Account
In the majority of situations, financial institutions (the bank) will not permit a name to be added to an existing current account. A new partnership bank account must be set up in the same name as the partnership.
This becomes the trading account for the partnership through which all partnership income and expenditure is channelled.
It is vital to take ownership of the process of moving bank accounts to ensure that any direct debits or standing orders for utilities or loan repayments are reestablished in the new partnership bank account.
3. Completing the On-Farm Agreement
The on-farm agreement should be completed by the partners and their families as part of setting up the partnership.
Some professional help can be used in this document but the day-to-day operation of the partnership is very much the responsibility of the partners.
If this aspect is not taken seriously, many of the benefits from its formation such as improved lifestyle will not become a reality.
4. Completing the Registration Process
The formation of the farm partnership and the registration process is typically completed with the help of all of the following professionals or a combination of all three:
- Teagasc Advisor/The Agricultural consultant
- The Solicitor
- The Accountant
The roles and responsibilities of these professionals have been described in earlier in this booklet and it is vital that these professionals co-operate and work together in the formation of the partnership to achieve the best result for the farm family.
Source: Teagasc’s Guidelines to forming a Farm Partnership.