Partnership Succession

Released On 4th Nov 2024

Succession should be a positive time for the family. It gives the opportunity to build in strength, empowering those that want to be involved to bring their skills, knowledge, commitment, and enthusiasm to the business.

Decisions to join or retire from a partnership need to be taken with a full understanding of what it means including the tax position of income and assets, ownership of assets, inheritance, VAT status, personal liability, decision making… I could go on.

We continue to see various new cases, including the farming family partnership dispute Proctor vs Proctor. This case involved a sister who retired from the family farming partnership but then claimed a one-quarter share of the partnership assets. The court concluded that the retiring partner retained their proprietary interest in the partnership assets, including tenancies, as there was no clear agreement stating otherwise.

There was ambiguity regarding the process for determining the value of the business that each successor would inherit, and no financial settlement agreed. As a result, family members had different expectations and understandings of their entitlements, leading to a legal battle.