As far as I can remember the family farming operations have been in a partnership. Is there any reason to change?
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It is not uncommon to see farming businesses that have continued on through generations without any change. This can be based on a decision to not break the family legacy, simplicity in not changing, concerns about costs to change or undertaking a review and confirming no need for a restructure. However, quite often it can be due to not considering the question – should we understand if our family operations are structured effectively?
In essence understanding if you are structured effectively is no different to challenging yourself on how efficient you are with your day to day operational actions on the ground – it is just in a different area of your business; the administration side.
Asset protection, succession, growth of the business, growth of the family, tax, cash flow and estate planning are all common considerations when undertaking a review to restructure. Sometimes, it is purely to simplify the current position of the family when there is unnecessary complexity in the current structures used in the family entities.
Every family has a different set of circumstances to consider. To make an informed decision you need to have a holistic view on where you are and what exists today, then take a forward thinking view of where you want to be and what is possible in the future. Who will be on the journey with you and the potential challenges you identify will also play a key role in the decision.
As with all business decisions, effective communication with family members and between the advisers supporting you will help you make the most informed decision on the topic.
If you work through the process with your advisers you should come up with some options to consider, then assess the pros and cons. It is important to note if you find a valid reason to restructure e.g. move the business operations from a partnership structure to a family trust structure, there are a range of tax considerations. Don’t underestimate the administration involved in executing a restructure, as the cost of not getting it right will most likely be far greater than undertaking the transaction itself.
If you would like more information or have a question, email albury@crowehorwath.com.au.
Cade Gow, Crowe Horwath
