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
Small BusinessLimited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
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.
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.
Small BusinessLimited partnerships and master limited partnerships have one difference that makes all the difference.
TaxesBusiness partners need the information on this form to complete their own tax returns. Here are the details.
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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.
InvestingLearn about the advantages of forming an LLC over a corporation, including ease of administration. Read about the advantages that a corporation may offer.
Small BusinessWhen two or more people get together to run a business, the odds of conflict and financial risk increase without the proper controls in place.