A sole trader farmer wants to bring his son into the business as a partner and has given me the draft partnership agreement from his solicitor to have a look at. The agreement states that 'the property and all items used for the purposes of the business is vested in the father and will not form part of the partnership', which to me means he keeps ownership of all the assets. This makes sense to me as there's no CGT because there's no disposal and as along as he remains active in the business he should get Agricultural Property Relief for IHT.
Where I'm confused is how would this work on the balance sheet? Before reading the agreement, I would have thought you'd have the sole trader assets and liabilities on one side and on the other, the fathers capital account at the balance sheet value and the son's capital account at zero. If the assets he currently holds aren't going to be part of the partnership do they not appear on the balance sheet? They must do. I've been at my desk a long time today so maybe it will make sense in the morning, but I'd appreciate any helpful insight.