A Limited Liability Company is an entity formed under your state’s LLC statute that has the legal characteristic of limited liability similar to that of a corporation, while it may qualify to be treated for tax purposes as a partnership. A Family Limited Partnership is a limited partnership owned by family members. A limited partnership has two types of partners, a general partner, and a limited partner. The general partner manages the partnership and is liable for all business affairs. Limited partners are not generally liable for partnership debts but cannot participate in management. FLPs are used for a range of matters, including owning and
operating a family business or investment. An advantage of FLPs is that a parent can serve as general partner and control all business matters (subject of course to his or her fiduciary responsibilities).  Family limited partnerships (FLPs) and limited liability companies (LLCs) are viewed by many as modern day reverse-alchemy: able to turn valuable marketable securities into devalued interests for estate tax purposes.  A recent case points out (yet again!) that this stuff is not child’s play, and risks abound. And as with so many estate, financial planning, asset protection and other techniques, most folks remain their own worst enemy by not taking the time to meet regularly with their advisers, adhere to formalities, and follow up.

Want to learn more about this recent case and other related cases? Call and make an appointment with the Deborah Sexton Law Office at (479) 443-0062.

This information in this article is brought to you by Martin M.
Shenkman, CPA, PFS, MBA, JD, AEP® through The NAEPC Foundation.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Small business planning includes the option of selecting the limited liability company (LLC) as the business entity.  LLCs are commonly used for small businesses such as sole proprietorships and professional practices (such as those of the accountant, lawyer, or doctor.)  The LLC is an essential part of small business planning in all fifty states as well as the District of Columbia. 

The Best of Both Worlds:  Partnerships and Corporations

The LLC pulls its tax benefits and operational flexibility from the partnership and its liability protective structure from the corporation.  It is, in a sense, the best of both worlds. 

The Limited Liability Company has Simplicity

The LLC is used often in small business planning because it is simple to set up and simple to run.  Even the taxes are simple as the LLC is a pass through entity so the taxes are reported on the members’ regular 1040 tax return.  Only an informational tax return is filed for the LLC itself.

The Limited Liability Company is Inexpensive 

The LLC is inexpensive to form and to maintain (a great benefit in small business planning.)  In addition, there is no double taxation as there is with the corporate structure.  As mentioned above, the LLC is a pass through entity.  The profits and losses pass through the LLC entity onto the members’ individual 1040s.

The Limited Liability Company has Asset Protection 

The LLC provides asset protection, as essential factor in small business planning.  When you sign as an LLC member, you are not risking any of your personal assets.  As in a corporation, your personal assets are protected.

If you need assistance with small business planning, consult with a qualified estate planning attorney.  The estate planning attorney will guide you in choosing and implementing an entity for your new or existing business.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.