Many equine businesses today are managed and owned by partnerships.
There are many reasons one would consider going into business with a partner. An equine business partnership allows you an opportunity to own a business if you couldn’t have afforded it alone. It can also bring additional skill sets to the table that you may not possess.
In a partnership, every person gives a certain amount of property, money, or labor. Each will share in the profits and the losses in the business, as partners are individually responsible for business debts.
Even if you are going into an agreement with someone you know, there are a few things you must know before entering an equine business partnership.
There must be a Written Agreement
Handshake partnerships and verbal agreements can sometimes be legal, however, have you thought of what will happen if something goes wrong? In cases where there is no written agreement, it will be challenging to prove that the partnership existed in the first place.
It’s strongly recommended to seek the help of equine legal solutions to ensure that all your agreements are made in a legal manner. This will also help you avoid some obvious misunderstandings and provide clarity around each person’s role. Remember, even partnerships formed with friends and family can go wrong. It’s best to have a solid contract in place from day one to avoid any conflicts.
There are Risks
As much as there are some advantages of getting into a partnership, there are risks too. Some advantages of an equine partnership are that all the individuals in the partnership are similarly accountable for liability, taxes, debts, decisions, and profits.
On the downside, partners have unrestricted personal liability with zero protection; there are no untaxed benefits and the partnership ends when one person dies or decides to leave. Also, if you are in partnership with a friend or family member, you run the risk that your relationship may become murky if something goes awry. Some choose not to go into business with relatives for this very reason.
Partners have the Same Voice in Managing the Business
All the members in a partnership must have the same voice in running the partnership. Each of the partners has power when it comes to making contracts and agreements. However, all the partners are bound by fiduciary obligations to one another, and shall not sell their property (i.e. livestock or other assets) without the consent of the other partners.
Each partner will be required to report the profits and incomes of the business on their individual tax returns. All of the partners should additionally become familiar with tax regulations and guidelines, however, it’s strongly encouraged to retain the services of a tax professional. Be sure to determine who is responsible for keeping the books prior to opening your business.
There are many other things that you must consider before jumping into an equine business partnership. You must be able to protect yourself from third-party injuries and property damage, for which you are legally responsible. Seek the advice of an insurance professional to ensure you have proper coverage. Your investment will also vary depending on the type of business and the number of assets and partners. Don’t enter into a legally binding partnership until you’ve thoroughly reviewed all of the details.