Family Limited Partnership

Family Limited Partnership or FLP for shot is a variation of a limited partnership. Family Limited Partnership can be great asset protection strategies. However, many people do not understand how Family Limited Partnership works. This section of Asset Protection Strategies information website explains how Family Limited Partnership works and can be used for asset protection.

How is Family Limited Partnership special?

In a Family Limited Partnership, the term 'family' comes from a provision of the Internal Revenue Code (IRC Code) that deals with the treatment of income shifted between family members. In another word, a Family Limited Partnership or FLP is a limited partnership formed between family members.

Example of a Family Limited Partnership

Creating a Family Limited Partnership

If you and your spouse create a Limited Partnership to hold your family's liquid investment assets. You are creating a Family Limited Partnership.

Contributing to Family Limited Partnership

Your Family Limited Partnership contributions are all of your stocks, cash, CDs, and mutual funds. The total of your Family Limited Partnership assets is $300,000.

Family Limited Partnership agreement

Your Family Limited Partnership agreement could state that your spouse will act as general partner with a 2% share (the size of the general partnership share does not affect the general partner's power to manage the partnership' s affairs). You agree in writing that your contributions to Family Limited Partnership constitute a 98% Family Limited Partnership interest.

The Family Limited Partnership agreement could state further that the Family Limited Partnership shall have the right to buy out the general partner for his or her share of the Family Limited Partnership and appoint a new general partner to replace him or her.

Who in the Family Limited Partnership is more likely to get sued?

We make the spouse who is more likely to get sued a general partner. For example, if the husband is more likely to get sued than the wife, we make the wife the general partner and vice versa.

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