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

Related Articles
  1. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  2. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  3. Insights

    Limited Liability Partnership (LLP): The Basics

    LLPs 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.
  4. Taxes

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  5. Retirement

    Using an LLC for Estate Planning

    An LLC is a powerful tool for estate planning. By establishing a family LLC, parents can distribute assets to their children with significant tax savings.
  6. Taxes

    Income Tax Planning Is the New Estate Tax Planning

    Use these strategies to minimize your family’s income taxes through your estate plan.
  7. Taxes

    How Private Equity and Hedge Funds are Taxed

    Private equity and hedge funds offer an appealing tax structure for those who can afford to invest in them. Here's why.
  8. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  9. Small Business

    4 Business Partnership Mistakes To Avoid

    When two or more people get together to run a business, the odds of conflict and financial risk increase without the proper controls in place.
  10. Financial Advisor

    How Master Limited Partnerships are Taxed

    MLPs are a different animal when it comes to taxes. Here's how they work.
Frequently Asked Questions
  1. Why Do Brokers Ask for Personal Information?

    There are 3 reasons a broker needs personal information: suitability, record-keeping and the law.
  2. How to Get a Company's Prospectus

    Obtaining a company's prospectus—or other financial documents—is now a simple online task.
  3. What Is a Blank-Check Company?

    A blank-check company has a business plan based on a merger or acquisition with another company.
  4. How do central banks inject money into the economy?

    Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions ...
Trading Center