Question

Limited Partnerships It might surprise you to know that limited partnerships can be formed by families as well as companies. Use the Internet to find out how to set up a family limited partnership. Who would be the general partners and who would be the limited partners--and why? What advantages would this type of arrangement have for the family? What has the IRS said about family limited partnerships?

Answer 1

1) Family Limited Partnership (FLP) is a type of arrangement in which family members pool money to run a business project. Each family member buys units or shares of the business and can profit in proportion to the number of shares he or she owns, and as outlined in the partnership operating agreement.

2) General partners usually own the largest share of the business and they are responsible for day-to-day management tasks such as overseeing all cash deposits and investment transactions.

Limited partners have no management responsibilities. They instead buy shares of the business in exchange for dividends, interest, and profits the FLP may generate.

3) Advantages to the Family:

a)Estate Planning Is Simple and Estate Tax Savings Are Substantial

b)Transferring of Ownership Is Systematic

c)There Are Significant Income Tax Benefits

4​)IRS said about Family Limited Partnership:

Family limited partnerships (“FLPs”) are a common estate planning technique. They permit centralized asset management, provide liability protection, and create a mechanism by which one generation can transfer wealth to the next without giving up control. Like all partnerships, FLPs do not pay federal income tax.