Intra-Family And Other Business Transfer Techniques - Family Limited Partnership or Limited Liability Company

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)
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