Partnership for rental income

[Gretchen]

Jurisdiction

Massachusetts

My husband and 2 siblings inherited farm land in Iowa. We established a Partnership (with the help of a Lawyer in Iowa) so that we could then set up a formal Lease between the Partnership and the Farmer who maintains and farms the land. The lease set up requires him to pay us Rent twice per year and he maintains and farms the land and keeps the sales/proceeds (just pays us rent). Our place of business is our residence, in Massachusetts (at the instruction of the Lawyer in Iowa who wrote the partnership agreement for us). I also completed a Business Certificate in our Town (I thought this needed to be done at the State level but the State told us we only needed to do this with the Town). Is this set up right? We had opened a bank account with this set-up but now (a year later), our bank is requiring Articles of Incorporation, Certificate of Formation, or Articles of Organization from us or they will close our bank account. But we are not an LLC or Inc - we are a Partnership. So we are unclear what we are supposed to do in this situation and worry that we were given incorrect advice.

 

[Zigner]

I suspect that the bank would like a copy of the partnership agreement. If that's not good enough for them, then ask them what they want to see that is not included in the agreement. Alternatively, find another bank that will accept the partnership agreement as evidence of the partnership.

 

[zddoodah]

I'm a bit confused about your use of pronouns. You started your post by saying that your "husband and 2 siblings inherited farm land," but then everything after that is "we" and "us." Are you a partner of the partnership, or is it just your husband and his siblings? Also, is it a general partnership or limited partnership? I assume that, for the most part, all of the references to "we" and "us" should actually be references to the partnership. Correct?

Our place of business is our residence, in Massachusetts (at the instruction of the Lawyer in Iowa who wrote the partnership agreement for us).

You mean the partnership's place of business. Correct?

Is this set up right?

No one here has any way of assessing this. You told us that a lawyer in Iowa wrote the partnership agreement. If you have concerns, then the partners of the partnership should discuss with that lawyer. If you're concerned about issues relating to business licenses required by your unidentified locality in Massachusetts, you'd need to have a local attorney review that.

We had opened a bank account with this set-up but now (a year later), our bank is requiring Articles of Incorporation, Certificate of Formation, or Articles of Organization from us or they will close our bank account. But we are not an LLC or Inc - we are a Partnership. So we are unclear what we are supposed to do in this situation

Ok...so...when Joe Schmoe from the bank called you to tell you that the bank needs one of those documents and you explained that the business entity is a partnership and not a corporation or LLC, what response did you receive?

 

[adjusterjack]

We had opened a bank account with this set-up but now (a year later), our bank is requiring Articles of Incorporation, Certificate of Formation, or Articles of Organization from us or they will close our bank account. But we are not an LLC or Inc - we are a Partnership.

Is it possible that the word "partnership" or "partners" doesn't appear in the name of the entity and the banker mistakenly believes it is otherwise?

who wrote the partnership agreement for us

So, you have a written partnership agreement? Common sense dictates that you send a copy to the banker and explain that the entity is a partnership and see if that suffices.

No need to panic and run to a lawyer yet.

 

[Gretchen]

Thank you - and apologies - to respond to the pronouns usage: yes, the partnership is my husband and his two siblings. I am not named but am trying to help from the sidelines ("we"). To open the bank account, we submitted the partnership agreement. The bank we used was just purchased so we think possibly the new bank's rules are different (which we found when we first looked for a bank - they all handle business accounts differently). We will resubmit and are asking for specifics - they have told us the documents that are needed. Someone mentioned maybe the bank, based on our title, assumes we are an LLC or Corp so that's a possible factor. That's part of our question out to them - to re-explain our set up (which feels unusual) and ask them - maybe they won't even work with partnerships. Thank yoy so much for responses - it is helpful!

 

[adjusterjack]

Without using real names what is the name of the entity on the account?

Use terms like Moe, Larry and Curly DBA Iowa Property.

Or Iowa Property Partnership.

You get the idea.

 

[Gretchen]

Larry-Moe Farms

 

[adjusterjack]

Larry-Moe Farms

Yeah, that's it. Nothing in the title reveals the nature of the entity.

The legal entity is actually (or should be) Larry and Moe dba Larry-Moe Farms.

Could also be Larry-Moe Farms, a Partnership or Larry-Moe Farms, a Limited Partnership.

Consider fixing that to avoid confusion in the future.

 

[Gretchen]

Thank you for your help. The bank got back to us (after we provided our Partnership Agreement) and stated that since they couldn't see the "Articles of Organization", they can't accept our documents. So they might be closing our account. I think we just need to find a bank that has a clue about Partnerships. I obviously don't have a clue but we set up this way at the advice of a lawyer.

 

[adjusterjack]

The lawyer wasn't the problem, nor was his advice. He could not foresee that the bank would have an idiot for an employee.

However, on the chance that other banks may also employ idiots, I suggest your husband open the next account under the name Larry-Moe Farms, A Partnership.

Have a copy of the partnership agreement with you and hand it to the customer service person.