Expanding the business partnership, inflation rates fall and plans to support famers in diversification
Today we discuss key considerations when expanding the partnership of a business, what a fall in inflation rates could mean to you, and how new planning laws are being introduced to enable farmers to diversify more easily.
Admitting a new partner into the partnership: What should you consider first?
For businesses that run as a partnership, there often comes a time where you need to consider admitting a new partner into the partnership.
Perhaps it’s a case of looking for someone who will pave the way for an existing partner to retire, maybe it’s a family business and there are plans to bring the next generation on board, or perhaps you have a key employee that brings value to the business and is looking to grow their role and status in the business.
Whatever the reason, what are some of the things you should consider before admitting a new partner? Let’s have a look.
Skills and experience
Does the new partner bring skills and expertise that complement the existing partners? This could be in finance, marketing, operations, or in some technical knowledge that is specific to your business.
Spend some time evaluating the prospective partner’s experience in your industry and how it can contribute to the growth and success of the partnership.
Financial contribution
How much capital will the new partner contribute to the partnership? Assess whether this capital is sufficient to meet the current and future needs of the business.
It also pays to check on the financial stability of the prospective partner. Will they be able to meet their financial commitments to the partnership?
Cultural fit
Things can get very uncomfortable if there’s a mismatch of values among partners in a business. While it’s not necessary to agree on everything – in fact an ability to have different ideas can be very valuable for a business – long-running disagreements or feuds can be very detrimental to morale across the business. So, consider whether the prospective partner’s values, work ethic, and vision align with those of the existing partners.
Look at how well the new partner will fit into the existing team. Healthy interpersonal dynamics are crucial for the smooth operation of the partnership.
Legal and regulatory considerations
Review your partnership agreement and update it to include terms related to the new partner’s rights, responsibilities, and share of profits and losses.
Make sure too that the new partner understands and is willing to comply with all the legal and regulatory requirements relevant to the business.
Impact on existing partners
How will the admission of a new partner affect the distribution of profits among existing partners?
Besides profit sharing, also consider how the prospective partner’s admission will impact decision-making processes within the partnership. More partners can complicate decision-making although they can also bring diverse perspectives.
Strategic fit
Does the new partner support the partnership’s long-term strategic goals? Their vision and goals ought to align with the partnership’s growth strategy.
Also, can the prospective partner bring new clients or access to new markets that will benefit or add to the strategic direction of the partnership?
Reputation and integrity
Unless you already know the new partner well, it is important to carry out thorough background checks to ensure that they have a good reputation and a history of integrity.
The reputation they have in their professional network can also benefit the partnership as a whole, so it’s worth assessing how strong this is too.
Exit strategy
However happy things are on the way into an agreement, it is always wise to ensure that you have a clear buy-sell agreement that outlines the terms for a partner exiting the partnership, whether through retirement, resignation or other circumstances.
Consider too how the admission of a new partner fits into the partnership’s long-term succession planning.
Summary
Admitting a new partner is a multifaceted decision that requires careful consideration of financial, operational, and interpersonal factors.
It’s essential to evaluate the prospective partner’s skills, financial contribution, cultural fit, and strategic alignment with the partnership. Legal and regulatory compliance, the impact on existing partners, the reputation of the individual, and an agreed-upon exit strategy are also critical components.
Conducting thorough due diligence and having open discussions among existing partners can help ensure a successful and mutually beneficial addition to the partnership.
Tax is also a consideration when a new partner joins a business. Why not ask us about our tool to calculate the tax implications of admitting a new partner into your business? We will be happy to help you!
Inflation rate falls in April
Official figures released last week by the Office for National Statistics show that the Consumer Prices Index (CPI) dropped to 2.3% for the 12 months to April 2024. This is down from 3.2% for the 12 months to March 2024.
The new energy price caps and resulting fall in gas and electricity prices were the main factors behind the decrease. However, rises in the price of petrol and diesel meant the rate did not fall as low as it might otherwise have done.
A fall in the inflation rate doesn’t mean that prices generally are falling, but rather that they are increasing more slowly. The news is encouraging though as the CPI continues to drop towards the Bank of England’s target of 2%.
The latest figures appear to have decided the Prime Minister on bringing forward the next general election. Many had expected this to take place in the autumn, however last Wednesday Rishi Sunak announced a general election for Thursday 4 July.
In his announcement, the Prime Minister referred to the latest inflation figures as well as the recent emergence from a (mild) recession. So, it seems that his decision has been triggered by these positive economic indicators.
The inflation rate falling is potentially good news for businesses as it suggests the rise in costs seen over the last couple of years is becoming less severe. Good news about the economy also increases in confidence in consumers and businesses alike, which may mean an increase in sales activity.
To review the Office for National Statistics figures in more depth, see: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
New planning rules reduce red tape for farmers
New planning laws that have come into force simplify the conversion of unused farm buildings into new homes, farm shops, and gyms. These changes aim to help farmers diversify and expand their businesses without the burden of submitting planning applications.
Farmers can now repurpose agricultural buildings and land for various new uses, including outdoor sports facilities, larger farm shops, and training centres.
Permitted development rights already allow farmers to make some changes without needing planning permissions, but these have now been extended to provide greater freedoms. For instance, the number of homes that can be provided through converting agricultural buildings has doubled from five to ten, provided certain conditions like space and natural light are met. This initiative supports development of rural housing, enhancing the availability of homes in rural areas.
Key changes include:
- Doubling the allowable floorspace for converting agricultural buildings to commercial use from 500 to 1,000 square meters.
- Increasing the size of new buildings or extensions that can be built on larger farms (over 5 hectares) from 1,000 to 1,500 square meters, and for smaller farms from 1,000 to 1,250 square meters.
- Doubling the number of homes that can be created from agricultural buildings from five to ten.
- Protecting important archaeological sites by restricting new developments near them.
See: https://www.gov.uk/government/news/planning-red-tape-slashed-for-farmers
Employee caught stealing customer data
A former management trainee at Enterprise Rent-A-Car UK Limited, Shairaz Saleem, has been fined after illegally obtaining customer data over a two-week period in 2019.
Concerns arose when Mr Saleem visited his workplace in West Yorkshire outside of his scheduled hours and an internal audit then revealed that he accessed 39 customer records from 25 different rental branches in just 32 minutes. Further investigation by Enterprise Rent-A-Car uncovered that Mr Saleem had accessed at least 213 records containing personal data without authorisation.
Mr Saleem was subsequently dismissed for gross misconduct. The company confirmed that Mr Saleem had no business reason to access the data and referred the case to the Information Commissioner’s Office (ICO), which launched a criminal investigation.
Mr Saleem appeared in Huddersfield Magistrates’ Court, where he pleaded guilty to unlawfully obtaining data. He was fined £265, ordered to pay £450 in costs, and a £32 victim surcharge.
Andy Curry, Head of Investigations at the ICO, emphasized the importance of respecting data privacy. He noted that employees with access to personal information must not abuse this privilege, as it breaches trust and can harm the company’s reputation.
While employers cannot foresee or prevent every possible scenario where an employee might act with malicious intent, this case highlights the need for businesses to implement and maintain internal audits and data protection procedures and protocols that can help to detect and prevent misuse of data by employees.
Businesses should be ensuring that staff are well-informed about their legal obligations regarding data privacy and the serious consequences of violating these standards.