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