An expert in rural legal matters is reminding farmers of the different ways to structure their businesses.
Melissa Taylor, associate solicitor in the Rural team at regional law firm Napthens in Kendal, points out that there are three common business structures which farmers are likely to utilise.
She warns that farmers must ensure they have taken professional advice to make sure the correct legal documentation is in place to support the structures and terms of the arrangement.
She explained that most farming businesses are run as a sole trader, partnership or as a limited company.
Melissa added: “Under a sole trader arrangement, one farmer is the owner of the business and entitled to all profits, but is also liable for all losses.
“Under a partnership, two or more people are carrying on a business together contributing their time, skills and even capital to the success of the business. Each partner receives a share of the profits, and will also be personally liable for all business debts and liabilities.
“Finally, farmers might own shares in a limited company, through which all trade is undertaken. The company is owned by the shareholders and run by people appointed as directors. A farmer’s interest in the business will be limited to the value of their shares, as will their debts.
“Every farming situation will be different and trade may be undertaken by one or more of these business structures, or even alternatives.
“In any circumstance, it is vital to take professional legal advice.”