A family limited partnership (FLP) is a type of limited partnership in which the partners are all or mostly family members and relatives. They are most often used for the purpose of transferring assets and wealth from one generation of family members to another.
FLP’s may also function as holding companies, where the family members can pool together their resources and assets in order to accomplish a combined business effort. This type of partnership structure may also allow for certain tax breaks and other benefits.
In a family limited partnership, usually one family member is selected to act as a general partner (GP), while the other family members are considered limited partners (LP). The general partner is responsible for the control and direction of the partnership activities. They may also be responsible for various transactions and contracts associated with the partnership. The limited partners have some rights but have limited roles in terms of management and oversight.
One common benefit of family limited partnership is that transfers can often be made between family members without them having to pay a gift tax.
Family limited partnerships must abide by local, state, and federal laws that govern partnerships. One legal issue that may arise with any limited partnership in general is that of termination of partnerships. Withdrawing from a limited partnership may have various legal implications for the former partner, and for the partnership as a whole.
Lastly, while FLP’s are legal, they should not be used in a way that would be considered as fraudulent or deceptive. For instance, a person cannot use the limited partnership to evade taxes or to commit activities that would constitute white collar crime. These can lead to business penalties, and in some cases, may lead to criminal charges as well.
Family limited partnerships have many benefits and advantages to them. However, they need to be filed and operated properly and according to sound business practices. You may wish to hire a business lawyer if you need help with any business or partnership matters. Your lawyer can help provide you with legal guidance and advice during the various stages of business formation. Also, if you have a business dispute, your attorney can represent you in court as well.