BlfrLancastor Farming, Saturday, September 24, 1988
Partnerships That Are Formed To Dissolve
BY LOU ANN GOOD
LEBANON When families
enter partnerships, they generally
intend to continue the arrangement
indefinitely or for a lifetime. But
over the years the Hoover brothers
of Lebanon have formed several
partnerships that are designed to
dissolve.
That doesn’t mean they failed.
Actually the agreements fulfilled
their purpose, and when that hap
pens, the brothers take steps to dis
solve them.
Dean, the third son of Abram
Hoover, is presently in two part
nerships with his brothers.
One partnership is with his
brother Reid. They farm 250-acres
of tillable land plus pasture that
their dad owns. Without their
father, the two brothers own 100
cows and 100 young stock, and
they feed about 300 head of steers
annually. Although both fellows
do the milking together, Reid is
responsible for the dairy herd and
the bookkeeping. Dean shoulders
responsibility for the crops and
beef operation. That means they
make the smaller decisions for
their area of responsibility, but the
larger decisions are still made
jointly.
With Dale, the two brothers own
a separate partnership called
Hoover Farms 11. Corporately,
they own large equipment; indivi
dually they each possess their own
tractor and some smaller pieces of
equipment
The brothers find partnerships a
a good way to pool resources—
financial, skills and knowledge. “It
would have been tough to start out
on our own,” Dean said.
He added that at this point, he
has no burning desire to be inde
pendent especially with a dairy
operation. On the other hand, he
said, “it’s difficult to own land
together, for then it needs to be
ive no. ..iing v jslre to w ...uepei especially
with a dairy operation,” Dean said. Nevertheless, he stres
ses the importance of drawing up partnership agreements
that can be easily dissolved if necessary. Here Dean stands
with his wife, Mary Ann, and daughter, Maria.
divided or sold if the partnership
dissolves.
“Financially, we boys bought
everything, we didn’t have it hand-,
ed to us,” Dean said. But he
believes those like he who grew up -
on a family farm have a better
opportunity. He credits his dad for
teaching them to be open to new
ideas and new ways. He explained,
“Dad was progressive. And he
allowed us to buy better cows and
feed.”
Dale agreed, “I give my dad cre
dit for his foresight in giving us the
opportunity to expand in this way.
“Not everything worked out exact
ly as planned. Changes were made,
some things were adapted. It’s a
great way to get started in farming
and I think a good way to
continue.”
But time changes things, the
children of the partners grow older
and want a place in the operation.
How do you decide how to reim
burse a child for time spent on
chores that were previously shared
by the partnership? How do you
include them in profit and duties?
To adjust their lifestyle to these
changes, the brothers terminate the
agreements as the need dictates.
“We are always careful to
include in the agreement a way to
take the partnership apart as easily
as possible,” Dean said. “The key
is to have a buy-sell agreement that
outlines how the partnership is to
be sold. Put a value qn everything
on regular basis so that when the
need to divide it arises, you can
determine the value.”
Dale added, “We had a good
attorney who gave us good advice
by saying, “Down the road, things
change. What works best today
might not in the future.’”
From this perspective, the
brothers learned that it’s important
to list machinery and livestock
purchases and the fair market val-
*
*
Z S *3-f**b>y**‘s'* * «
> . * ** * * ' ' , <r <
Dale and Charlotte Hoover gather with their children on theirjjorch Le^ non .
County. From left, Angela who Is the Lebanon County Dairy Princess, Matthew, 14,
and Alicia, 10, (seated).
ue of assets on a regular basis.
Yearly, they assign a detailed val
ue on their inventory and
equipment.
"When we dissolve a partner
ship, our attorney suggests that we
swap as many assets as possible for
tax savings,” Dale said.
Formerly Dale was in a partner
ship where profits were split even
ly with his father and later both his
brothers. Today Dale farms inde
pendently and owns only equip
ment under the partnership agree
ment with his brothers. Dale, his
wife, Charlotte, and three children
own an adjoining 94-acre dairy
farm with 70 cows. They rent an
additional 85-acre farm where they
feed 130 steers. “Some people may
be hesitant to form equipment part
nerships because it isn’t as easy to
plan things as it is when you arc
independent,” said Dale. For
example, you might need to wait a
day to plant corn because someone
else is using the equipment. In a
partnership, you need some give
and take. You must allow others to
have a shot at it.” Any trepidations
he may have completely disap
pears when “a piece of machinery
needs to be fixed and I only need to
pay one third of the cost.”
Dale cautions, “Some farmers
treat their equipment rough and are
not as particular with it as others.
In a partnership, this could cause a
problem, but he said, “We brothers
had the opportunity to work
together for several years before
we formed our first partnership.
It’s beneficial not to jump into it.”
The brothers take steps to solve
any questions that may arise from
the setup. “We have this under
standing that unless one is abso
lutely negligent in caring for
equipment, we split the repair
costs. So far, we’ve never had the
problem that someone was
negligent.”
In this type of setup, it’s impor
Hoover Farms is operated by the parti
Reid.
“The key is to have a buy-sell agreement that butlines how
the parnership Is to be sold. Put a value on everything on a
regular basis so that when the needs to divide It arises, you
can determine the value.”
tant that one person be responsible
to maintain the equipment; other
wise, maintenance might be
overlooked.
Ironically, the thing that the
brothers find the most satisfaction
in is also the most frustrating:
Being able to work together in a
family setting. Dean said, “We’ve
always got along on the whole. We
work well together.”
On the other hand, that doesn’t
mean there arc never disagree
ments to work out. “Sometimes we
need to work out a plan that satis
fies both parties when it comes to
deciding who takes care of what or
what amount of time someone
takes off or who fixes what
equipment.”
He explained, “It’s easier to
work time off agreements when
there are only two working
together than when their arc three.
I can say, ‘O.K. you milked for me
one night this week so I’ll milk for
you next week; ’but when there are
three working together, that philo
sophy does not work. It’s harder to
keep three satisfied with
arrangements.”
Diversified farming with both
dairy and beef has decreased over
head. “The beef operation allows
us to get more use out of our equip
ment. Beef doesn’t require as
(Turn to Pago B 19)