Families often share homes, vacations, holiday traditions, and fond memories. Sharing a business, though, is more complicated than shutting down the summer cottage together or planning next year’s family reunion. One type of family business is called the family limited partnership. It’s not just a business entity, though. It can be a powerful estate planning tool. Keeping it in the Family. The FLP (“Family Limited Partnership”) is an entity created to manage family assets. The general partner and limited partners are all family members. For tax purposes, ‘family’ includes spouses, children, ancestors (parents or grandparents), lineal descendants (children and grandchildren), and trusts created for the benefit of any member of the family. A family limited liability company (“FLLC”) is similar to an FLP. The primary difference involves liability. While FLP’s are managed by general partners who have direct liability, the FLLC provides limited liability to all partners. Care should be taken when transferring assets to an FLP or an FLLC. Certain assets may cause increased scrutiny from the IRS. Also, creating an FLP or FLLC may not be the best solution for your family, so consult with an attorney first. Advantages to Establishing a Family Limited Partnership or Family Limited Liability Company. There are several great reasons to consider creating an FLP or FLLC, including: Easier transfer of assets upon the death of a partner. Potential income tax benefits for the partners. General partner in an FLP continues to control assets. Partners in an FLLC collectively, if member-managed, or through a manager, if manager-managed, continue to control assets. Simplified estate planning that may lead to reduced estate tax. All limited partners in an FLP are protected from most creditor claims. All partners in an FLLC receive limited liability protection. Disadvantages to Establishing a Family Limited Partnership or Family Limited Liability Company. As with any strategy, there are some downsides, including: The general partner of an FLP may be vulnerable to creditor claims or judgments. Possible capital gains issues. Partners must be over the age of 18. A parent or guardian can control a minor’s interest, but it may not be the best way to transfer assets to minors. Get the Expert Advice You Deserve. Law Offices of John Mangan, P.A. Palm City – Stuart, FL Do you question the need for attorney guidance with so many online resources? Because laws and regulations are complex, and because every person has a lot at risk, more people than ever are seeking professional guidance from an experienced, knowledgeable source. That helps explain the rapid growth of our firm. Whether you happened upon this website by accident or are one of the many referrals we receive from a nearly 15-year collection of satisfied clients, our staff can provide customized estate planning guidance for you. Call us. Our number: 1 (772) 218-0480
