Family Limited Partnership or Limited Liability Company
A family limited partnership (FLP) is a partnership that is created to transfer assets to younger generations at a reduced gift tax valuation and cost. The limited liability company (LLC) is an entity form that combines both the benefits of a corporate and partnership ownership. The LLC allows a business owner to have limited liability and pass-through income.
FLP – Advantages and Disadvantages:
- Senior family member retains control of business
- Junior members can restrict transfers on limited partner interests
- Creditor protection
- Transfers at substantial discounts
- Annual exclusion can be used for partnership interests
- High attorney fees (disadvantage)
- Annual asset valuation and discounted unit calculations (disadvantage)
LLC – Advantages and Disadvantages:
- Owner can add other family members as partners
- No double taxation (income passes through to partners)
- Limited liability for partners
- Difficult to raise investor capital (disadvantage)
- Some states will levy a "franchise tax" (disadvantage)
Sample Questions 1 - 5
Managing WealthA family limited partnership (FLP) can go a long way toward securing your family's property.
Small BusinessLimited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
Small BusinessA partnership is an organization where two or more owners operate a business.
Small BusinessLearn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
InsightsLLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
Small BusinessLimited partnerships and master limited partnerships have one difference that makes all the difference.
Managing WealthThe pending IRS rule changes for partnerships and LLCs could drastically curtail the way assets within them are valued and taxed. Here's why.
InvestingAn LLC is a good combination of protection with flexibility and tax benefits. It provides an array of taxation alternatives while shielding individual members from personal liability.
TradingCould incorporating your business help protect it? Find out here.
RetirementAn LLC is a powerful tool for estate planning. By establishing a family LLC, parents can distribute assets to their children with significant tax savings.