Business Partner Disputes in Agriculture: Can Mediation Keep a Farm or Agribusiness Out of Court? When owners of a farm, agricultural LLC, partnership, or other closely held agribusiness stop agreeing about how the business should operate, the consequences can extend far beyond an ordinary disagreement. Crops still need to be planted or harvested. Livestock still need care. Loans must be paid. Employees need direction. Contracts must be honored. And a dispute between two owners can quickly affect the value and future of the entire operation.
Litigation is sometimes necessary, particularly when there are allegations of fraud, misuse of company property, serious fiduciary-duty issues, or other conduct requiring immediate legal action.
But many agricultural business disputes begin with disagreements that may still be capable of resolution.
Mediation can give business owners an opportunity to determine whether they can fix the working relationship, restructure the business, negotiate a buyout, or create an orderly exit before the conflict consumes the operation.
What Causes Business Partner Disputes in Agriculture?
Two people can start a business with the same goals and end up with very different ideas about how it should be run.
This is particularly common in closely held and family-owned agricultural businesses.
Disputes may involve:
- One owner doing substantially more work
- Disagreement overcompensation
- Business distributions
- Equipment purchases
- Borrowing and debt
- Expansion of the operation
- Adding new land
- Hiring family members
- Capital contributions
- Personal use of company property
- Recordkeeping
- Access to financial information
- Grain or livestock marketing decisions
- Conservation or production practices
- Taking on new investors or owners
- Succession planning
- Retirement
- Whether profits should be distributed or reinvested
- One owner wanting to sell
- Valuation of an owner’s interest
Sometimes the underlying problem is even simpler: the owners never created a clear process for making decisions when they disagree.
Start With the Business Documents
Before deciding how to handle an agricultural business dispute, it is important to understand what actually governs the relationship.
For an LLC, that may include an operating agreement, articles of organization, amendments, company records, and other agreements.
For a partnership, there may be a written partnership agreement.
A corporation may have bylaws, shareholder agreements, buy-sell agreements, or other governing documents.
Those documents may address important questions such as:
Who manages the business?
What decisions require a vote?
Can one owner bind the company?
How are profits distributed?
Can an owner transfer an interest?
What happens when someone wants to leave?
How is a business interest valued?
Is there a required buyout procedure?
What happens if the owners deadlock?
A business that has operated for years based largely on handshakes and family relationships may discover that these questions were never clearly answered.
That uncertainty often becomes much more important once conflict begins.
Why Agricultural Business Disputes Are Different
A farming operation cannot necessarily stop while the owners argue.
Seasonality matters.
A dispute in March may affect planting. A dispute during harvest may affect grain sales, equipment use, trucking, or storage decisions. A livestock operation may require decisions every day regardless of whether the owners are speaking to one another.
Agricultural businesses may also own significant assets while having limited available cash.
Farmland, equipment, livestock, buildings, and ownership interests may be valuable, but that does not necessarily mean one partner has enough cash available to immediately buy out another.
This is where creative settlement discussions can become particularly valuable.
How Can Mediation Help Business Partners?
In mediation, a neutral mediator helps the parties identify disputed issues and explore possible resolutions.
The mediator does not run the business and does not simply declare one owner right and the other wrong.
Instead, mediation may allow the owners to consider several different outcomes.
Repair the Business Relationship
Some disputes can be resolved by creating clearer rules.
The owners might agree to:
- Define specific management responsibilities
- Establish spending limits
- Require approval for major purchases
- Change compensation
- Create regular financial reporting
- Establish scheduled owner meetings
- Divide areas of responsibility
- Develop procedures for future disagreements
If the core business is healthy and the owners still want to work together, restructuring the relationship may make more sense than ending it.
Negotiate a Buyout
Sometimes the relationship has run its course.
One owner may want to continue the operation while another wants to leave.
Mediation can provide a forum to negotiate the value of the departing owner’s interest, payment terms, financing, security, release of liabilities, transition responsibilities, and other issues involved in a buyout.
Depending on the business structure and governing documents, valuation rights and exit procedures may also be affected by Illinois law.
Divide or Restructure the Operation
In some circumstances, the parties may be able to divide assets, separate business lines, lease property to one another, restructure ownership, or create another arrangement that allows both sides to move forward.
Agricultural businesses can involve complicated combinations of land ownership, operating entities, leases, equipment, debt, and family relationships. A settlement may therefore require more creativity than simply writing a check.
What If One Owner Wants to Dissolve the Business?
This is where obtaining legal advice becomes particularly important.
Illinois law contains different rules depending on the type of business entity.
For example, the Illinois Limited Liability Company Act provides circumstances in which an LLC may be judicially dissolved. Those include situations in which the company’s economic purpose is unreasonably frustrated, it is no longer reasonably practicable to carry on the business in conformity with its governing documents, or there has been illegal, fraudulent, or willfully unfair and oppressive conduct.
Importantly, Illinois law also allows a court in certain LLC dissolution proceedings to order a remedy other than dissolution, including a buyout of a member’s distributional interest, essentially the member’s economic right to receive distributions from the company.
Partnership law contains its own rules regarding withdrawal, dissociation, buyouts, dissolution, and winding up. Under Illinois’ Uniform Partnership Act, whether a departing partner is bought out or the partnership dissolves depends on the type of dissociation, the partnership agreement, and the circumstances involved.
The existence of these legal remedies does not mean dissolution, or a buyout is automatic.
In fact, the possibility of court intervention can be one reason owners choose to negotiate while they still have greater control over the outcome.
Why Consider Mediation Before Filing a Lawsuit?
Litigation may be necessary in some cases, but it changes the nature of the dispute.
Once a lawsuit is filed, the parties may face discovery, depositions, expert witnesses, court hearings, legal fees, and significant demands on their time.
The dispute also becomes more adversarial.
For agricultural businesses, that can be particularly disruptive when the owners must somehow continue making daily business decisions together.
Mediation may allow the parties to address the dispute privately and focus more directly on a workable business resolution.
It can also be used after a lawsuit has already been filed.
The goal is not to avoid litigation at all costs. It is to determine whether there is an opportunity to resolve the problem on terms the parties’ control before a court is required to do it for them.
Financial Information Matters in a Business Mediation
A meaningful settlement requires reliable information.
Before negotiating a buyout or division of an agricultural business, the parties may need to understand:
- Business income and expenses
- Outstanding debt
- Equipment values
- Real estate ownership
- Accounts receivable
- Inventory
- Livestock
- Stored grain
- Contracts
- Tax consequences
- Ownership percentages
- Capital accounts
- Personal guarantees
- The value of the business itself
Accountants, appraisers, business-valuation professionals, agricultural consultants, or other experts may need to assist.
The mediator can help facilitate negotiations, but the parties should understand what they are negotiating over.
Frequently Asked Questions About Agricultural Business Mediation
Can two members of a farm LLC mediate a disagreement?
Yes. LLC owners can use mediation to address management disputes, financial disagreements, ownership issues, buyouts, and other business conflicts if the parties are willing to negotiate.
What if we have an operating agreement?
The operating agreement may be one of the most important documents in the dispute. It should be reviewed carefully because it may address management rights, voting, transfers, distributions, buyouts, dispute resolution, or an owner’s exit from the company.
Can one business partner force another partner out?
The answer depends on the type of entity, the governing documents, applicable Illinois law, and the circumstances. LLC members and partners generally should not assume that another owner can simply be forced out because the parties no longer get along. Any removal, buyout, dissociation, or other exit must be evaluated under the applicable operating or partnership agreement and relevant statutes.
Can mediation result in one owner buying out another?
Yes. A negotiated buyout is one possible outcome. The parties may need to address valuation, payment terms, financing, personal guarantees, taxes, existing debt, and transition responsibilities.
What happens if the owners cannot agree on the value of the business?
They may use an independent appraiser, accountant, or business-valuation expert. In mediation, the parties can also negotiate how a valuation will be performed and whether they will accept a particular methodology or expert’s conclusion.
Can we mediate after a lawsuit has already been filed?
Yes. Mediation can occur before or during litigation. A pending lawsuit does not necessarily prevent the parties from negotiating a settlement.
Does a mediator represent the company or one of the owners?
Neither. A mediator is neutral. Each party may have separate legal counsel to provide advice, evaluate rights and obligations, and review any settlement agreement.
Deal With the Dispute Before It Damages the Business
Business disagreements are not unusual. Allowing them to remain unresolved can be far more dangerous.
When owners stop communicating, ordinary farm decisions can become battles. Investments may be delayed. Employees may receive conflicting directions. Lenders, landlords, customers, vendors, and family members may eventually feel the effects.
Mediation can provide agricultural business owners with a structured opportunity to determine whether the relationship can be repaired or whether it is time to negotiate a different future.
Rincker Law, PLLC works with farmers, agricultural businesses, LLC members, partners, and family-owned companies on matters involving agricultural law, business disputes, business planning, and mediation. If a disagreement among owners is threatening your farm or agribusiness, contact Rincker Law, PLLC at (217) 774-1373 to discuss your legal options.
Legal Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Rights and remedies in an agricultural business dispute depend on the type of entity, governing documents, facts, and applicable law. Consult an attorney regarding your particular circumstances.