Using a Family Limited Partnership to Protect and Control Business Assets

Owners of family businesses that wish to keep the business viable for future generations would be wise to investigate establishing a family limited partnership to both protect and maintain control over their business assets.

When you establish a family limited partnership (FLP), business assets are transferred into the partnership and swapped for shares.  As owner, you would keep the general partner shares, and then gives limited partnership shares to children over time, which removes the value of those gifted shares from the estate.

As general partner, the business owner controls how the assets are managed, how the partnership operates and decides whether or not to distribute any income.  Limited partners do not participate in the management of the partnership, and owners can stipulate whether or not shares can be transferred or sold without their approval.

Since there is no market for FLP shares, a business owner is able to transfer assets to heirs and remove them from the estate at a discounted rate.  In addition, assets enjoy some protection from children’s potential creditors or legal judgments.

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