What is a Family Limited Partnership
What is a Family Limited Partnership? All about family limited partnerships and why it is an excellent way to protect your assets.
What is Family Limited Partnership
Family limited partnerships are among the most basic forms of protection. They provide good asset protection against future lawsuits, allow you to maintain control of your assets, and can provide income and estate tax benefits.
Through a FLP, you are eligible for pass-through taxation, meaning that you would not be liable for income taxes. They also allow you to share income.
Establishing a Family Limited Partnership
Family limited partnerships must have at least two owners. It is certified under state laws, and thus you would need to pay state fees in order to maintain the FLP.
FLP allow two levels of ownership – the first level is the active ownership level, where active owners – called general partners – have 100 percent control of the entity and its assets. The second level is the passive ownership level, where passive owners have little control of the entity and limited rights.
Tips on how to maximize the use of FLPs and LLPs
In order to maximize the use of FLPs and LLPs, you should try to separate the dangerous assets and the safe assets in different holdings. That means that should there be a lawsuit that threatens your holdings, the safe assets would not be jeopardized together with the dangerous assets.