Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

What is a Family Limited Partnership?

Affluent families tend to move wealth from one generation to the other, they do this through diverse means. A Family Limited Partnership (FLP) is a type of business that allows the transfer of business, wealth and financial assets between members of a family or from one generation to another. An FLP is a business partnership in which allows members of the same family to pool money for business purposes. Since the business capital comes from all members of the family, each member owns shares of the business and is entitled to certain profits. An FLP can otherwise be called a joint venture between members of a family.

How is a Family Limited Partnership Used?

The partnership of a family limited partnership (FLP) is in two categories which are general partners and limited partners. This classification is done according to the amount of units or shares that each family member owns. General partners are in charge of managing the assets and operations of the FLP, these are members with the largest share in the business. General managers oversee the management of the business and other administrative functions such as the investments and transactions of the business. Limited partners have shares in the business but do not take any administrative or management roles. Rather, the shares they hold in the business are exchanged for profits and dividends that the business generates. Typically, an FLP is created to simulate wealth between members of a family and pass down wealth from one generation to another. An FLP is created through money pooled from members of the family. There are different FLPs, while some run on a large scale, some run on medium and others on a small scale. In every FLP, the general partner is a member of the family with the highest shares and highest capital in the business. Other members of the family who own a stake in the business are called limited partners. It is also possible for an FLP to have more than one general partner.

Estate and Gift Tax Advantages of Family Limited Partnerships

There are many benefits that individuals derive from FLPs, the most important ones being tax protections and gift tax advantages. Partners in an FLP can receive gifts that are tax-free, in a year, the gift tax advantages that members of FLPs can enjoy is $15,000 for individuals and $30,000 for married couples. Aside from tax advantages on FLP, there are also estate benefits for FLPs.

Related Topics

• Business Entities (Intro)
• Why is studying business entities important?
• Considerations When Forming a Business Entity
• Holistic (Detailed) Overview of Setting Up a Business Entity
• What are Business Entities?
• What is a Closely-held vs Publicly-held Business?
• What are the main types of business entity?
  
• What are the primary characteristics of business entities?
• What is Creation of a business entity?
• Where to Form a Business
• Incorporating in Delaware
• Forming an LLC in Nevada or Wyoming
• Creating a Company Offshore
• Promoter
• Promoter Liability
• De Jure Corporation
• Ultra Vires
• Brassplate Company
• What is Maintenance of a business entity?
• What is Continuity of a business entity?
• Business Continuity Planning
• Buy Sell Agreements
• Shotgun Clause
• Winding Up
• Dissolving a Foreign Qualification
• What is the Ownership structure of a business entity?
• Joint Stock Company
• Parent Company
• Subsidiary Company
• Wholly-Owned Subsidiary
• Operating Subsidiary
  
• Holding Company
  
• State-Owned Enterprise
• Mutual Company
• Conglomerate
• What is Control of a business entity?
• What is Personal liability of owners of a business entity?
• Entity Theory
• Piercing the Corporate Veil
• What is Compensation of business owners?
• What is Taxation of a business entity?
• What is Sales & Use tax?
• What are payroll and self-employment taxes?
• What are the major characteristics of a Sole proprietorship?
• Uniform Partnership Act
• Uniform Limited Partnership Act
• Partnership Agreement
• At-Will Partnerships
• Responsibilities of Partners to the Partnership
• Silent Partner
• Funding the Partnership
• How are Partners Compensated
• Splitting Equity in an Industrial Partnership
• Terminating the Partnership
• Types of Partnerships
• What are the main characteristics of a General partnership?
• Tort Liability of General Partner
• What are the main characteristics of a Joint venture?
• What are the main characteristics of a Limited partnership?
• Family Limited Partnership
• Master Limited Partnership
• What are the main characteristics of a Limited liability partnership?
• What are the main characteristics of a Limited liability company?
• Forming an LLC
• Articles of Organization
• Operating Agreement or LLC Agreement
• Why You Need an LLC Agreement
• LLC Compensation of Members
• LLC Taxation
• Converting to an LLC
• What are the main characteristics of a Corporation
• Articles of Incorporation 
• What to include in the Articles of Incorporation
• Corporate Bylaws
• Exiting the Corporation
• Dissenter's Rights
• What are the requirements to be an S Corporation?
• Non-Profit Organization
• NonProfit Business Entities
• Private Foundation
• A Detailed Explanation of the Sole Proprietorship
• Taxation of Sole Proprietorship
• A Detailed Explanation of the General Partnership
• 50/50 Partnerships: Never a Good Idea
• Publicly-Traded Partnerships
• A Detailed Explanation of the Limited Liability Company
• A Detailed Explanation of the Corporation
• Keepwell Agreement (Letter of Comfort)
• Personal Service Corporation Definition
• A Detailed Explanation of the Non-Profit Entity
• Public Limited Company (UK)