Agriculture Reference
In-Depth Information
A limited partnership often suffers from a lack of available funds and talented people when
compared to a corporation.
Another disadvantage is the lack of continuity and stability of a partnership. When a
partner leaves the partnership as a result of withdrawal, death, or incapacity, a new partner-
ship must be formed. The old partner's share must be liquidated, and this can often place
a severe burden on the partnership's capital position. Another problem is that which occurs
if one of the partners becomes incapacitated by accident, ill health, old age, or for some
reason fails to pull a full share of the load. Often the only way to remove such a partner is to
liquidate the entire business. When a partner leaves, it is often hard to determine what that
individual's share is worth. For this reason, a formula and pay-off method should be incor-
porated in the original partnership agreement. Then the business may more easily be dis-
solved and a new one can be formed. If the means for establishing the value of the partner's
share and the process for transfer and acceptance of new partners has been fi rmly established
in the written partnership agreement, this transition can be reasonably smooth. While being
taxed on income as separate individuals can be an advantage in some situations, it can be a
disadvantage in others (just as with the sole proprietorship).
Finally, one very important consideration is the need for a carefully drafted, written
partnership agreement. Any person entering into a partnership should fi nd the most compe-
tent legal assistance possible, an attorney who is familiar with the problems of partnerships,
and trust that attorney to prepare an agreement for the agribusiness. When partnerships are
Plate 4.1
Presentation to a group
The right form of business organization is required to cover the varied goals of fi rm owners,
employees, and customers. Photo courtesy of USDA Natural Resources Conservation Service.
