Family Limited Partnerships for Businesses

Charleston Family Limited Partnership | Estate PlanningA Family Limited Partnership (FLP) is a powerful estate planning device that allows a business owner to allocate shares of ownership to several loved ones. This estate planning mechanism also enables the business owner to differentiate the involvement of the new shareholders into two categories: general partners and limited partners. General partners have the unique ability to make business management and influence corporate operations at the expense of greater liability to business actions. Meanwhile, limited partners are not able to directly influence business decisions but these shareholders also have much greater asset protection through lowered liability.  One of the most obvious benefits of the inclusion of limited partners comes in the form of reduced estate costs during the estate disposition. In other words, the lesser involvement of limited partners results in considerable tax-benefits for the business owner and the business alike.

Larger business owners may also recognize a family limited partnership as a valuable asset protection tool for its ability to reduce the threat of estate litigation. With a greater number of parties claiming ownership to the business, it is more difficult and thus less common for creditors to succeed in filing lawsuits against the corporation. Most any asset placed under the name ownership of a limited partner becomes an exempt asset, placing this property, possession, or share beyond the reach of creditors’ claims.

Family Limited Partnership for Real Estate

It is not unusual for people to put a residential real estate property, commercial real estate property, or a piece of party that is not readily divisible into a Family Limited Partnership. Some loved ones may also not want to take on the responsibility of managing an entire real estate property on their own. Instead, a property owner can allocate the ownership of a real estate property– usually a beach house, summer home, or a secondary investment property– to multiple family members so that the duties of ownership are not burdening one individual. In many cases, this act of estate planning reduces the income tax liability of the new owners and preserves the well-being of a real estate property. For real estate investments, the security of a family limited partnership can promote the appreciation of the property.