1. Partnership Agreements
American Agriculture Law Association
32nd Annual Agriculture Law Symposium
By Cari B. Rincker, Esq.
© 2011

2. Overview: “The Desirable Plan”
• Understand culture of
industry
• Does client have a
business plan?
• Choice of business
entity
• Draft and execute a
partnership agreement

3. Cultural Hurdle
• “Handshake” Culture
• Partnerships are
oftentimes formed with
trusted persons
– Family
– Friends
• Reluctance to put
Photo from Washington
agreements in writing or State University Extension
hire attorneys
• Dynamic of farm family
– Succession planning

4. Business Plan
• Does your client have a
business plan?
– Does your client need a
business plan?
– Should you help your
client develop a
business plan?
• How can your client’s
business plan be
incorporated into the
Partnership Agreement?

5. Choose a Business Entity
• Sole Proprietorship
• General Partnership
• Limited Partnership
• Limited Liability
Company
– Professional Limited
Liability Company
• Corporation Photo taken at cattle branding
near Casper, Wyoming
– S-Corp vs. C-Corp.
• Cooperative

6. Understand Purpose of Partnership
• “Big Picture”
• Purpose and Scope
– What Type of Business?
– Authorized business
activities?
– Unauthorized business
activities
• Duration or Term Erica Leubner from Tim’s Pumpkin Patch
in Upstate New York

7. Some Basics
• Principal Place of
Business
• Choice of Law
– Are there any specific
state law issues?
• Name of Partnership
• Licenses, Permits, Fr
anchises?

8. Identify the Partners
• Contact information
– Full legal names
– Business entity
– Addresses
– SSN or FEIN
• Qualifications of Partners
– What are they each
“bringing to the table”
– Keep this in mind, even with farm families

9. Show Me the Money
• What are the initial capital
contributions of each partner?
– Look at total initial capital of the Partnership
– Cash, real property, personal property, intellectual
property
– When should initial contributions be made
• Subsequent Capital Contributions
• Interest on capital contributions

10. Title to Partnership Property
• Title to Property to
Remain in Partner
• Property to be in the
name of the
Partnership
• Rights in Specific
Partnership Property

11. Liabilities of Partnership
• Mortgages or liabilities
assumed by partnership
• Loans to Partnership By
Any Partners
• Look at terms
– Amount
– Interest
– Security for repayment
• Monthly Expenses Photo taken at Marc King
– Is the partnership Simmentals in Montana
properly capitalized?

12. Duties of Partners
• Full or part-time duties
– Management of day-to-
day operations
– Accounting
– Marketing/Advertising
• Time partners to devote
Photo taken at Lake Land College
to Partnership in Mattoon, Illinois
– Hours/week
– Salaries
– Vacation days

13. Restrictions on Partners
• Examples:
– Not borrow money in name of
partnership or individually for
partnership use
– Not lend money or property of
partnership or transfer, pledge or
mortgage assets of partnership
– Not purchase property for partnership
– Not execute bonds, guaranties, or
indemnities
– Not release claims of partnership or
engage in settlements for partnership
– Not to Engage in Other Businesses Photo taken in Nebraska
– Hire/Fire employee without consent of
other partners

14. Management of the Partnership
• Managing Partner(s)
– Limitation on Powers
– Committees
• Voting
– Matters requiring unanimity
• Participation of Partners
– Normal operations
– Extraordinary actions
– Description of actions requiring vote of partners

15. Profits and Losses
• How the Partners will divide profits, losses and
other financial attributes of partnership
– Special tax allocations
• Depreciation
• Capital gains/losses
• Other tax attributed
– When will the division
of profits take place

16. Accounting
• Who will manage books?
• Where will records be kept?
• Method of accounting
(e.g., cash basis)
• Tax year (e.g., calendar year)
• Appointment of independent accountant
• Periodic statements to partners
• Right of partner to examine books
• Accounting between Partners

17. Transfer of Partnership Interest
• Restrictions on assignment, sale or pledge of
interest
• Right of partnership to buy interest
– Right of first refusal
– Partner’s right to put interest to partnership
– Valuation of interest
• Formula for valuing goodwill or other tangibles
– Method of payment
• Installment payout
– Duty of incoming partner to assume share of
partnership liabilities

18. Admission of Partners
• Voting requirements
• Initial qualifications
• Duties/restrictions
• Equity
• How will profits/losses be
divided with new
partners?

19. Withdrawal or Retirement of Partners
• Notice of Withdrawal or
Partnership
• Is consent required from
other partners?
• If no consent,
non-compete clause?
• Payment for partnership
Leland and Davadia Rincker
interest
• Will partnership continue?

20. Expulsion of Partners
• Grounds
– Adjudged insane or incompetent
– Becomes disabled or unable to fulfill his or her
obligations to the partnership for X number of days
– Fails to fulfill obligations
• Vote required
– Majority?
• Payment for partnership interest as if partner
voluntarily withdrew
• Non-compete?
• Will partnership continue?

21. Dissolution of Partnership
• Causes of Dissolution
– Termination of defined term
– Withdrawal, retirement or
expulsion of any Partner
– Death, disability, or
bankruptcy of any Partner
– Unanimous agreement
• Right to Continue Business After Dissolution
• Payment if Partnership Continued After
Dissolution
– Value of partnership’s interest

22. “Winding Up” Stage
• Upon dissolution, if partnership is not to be
continued then it will be “wound up”
• During the “winding up” stage, the assets of the
partnership will be applied to liabilities in the
following order:
– Amounts owed to creditors other than Partners;
– Amounts owed to Partners other than for capital and
profits;
– Amounts owed to Partners for capital; and,
– Amounts owed to Partners for profits.

23. Alternative Dispute Resolution
• Negotiation
• Mediation
– State Agriculture Mediation Program?
• Arbitration
– Rules
– Arbitrator(s)
• Exceptions to ADR
– Preliminary injunctions, temporary restraining orders,
court orders for interim relief to preserve status quo

24. Miscellaneous Provisions
• Notice
• Amendments
• Life Insurance
• Waiver
• Validity
• Confidentiality
– Separate NDA?
• Rules of Interpretation
• Indemnification
• Entire agreement

25. Contact Me
11 Broadway, Suite 615
New York, NY 10004
(212) 427-2049 (office)
(212) 202-60777 (fax)
cari@rinckerlaw.com
www.rinckerlaw.com
Twitter: @CariRincker @RinckerLaw
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