Often when the topic of
planning for the future of one’s business comes up, the business owner strongly
favors passing on the business to family members; specifically children or even
grandchildren. One technique that is
widely popular and helps achieve that objective is a FAMILY LIMITED
PARTNERSHIP. The best way to start a
discussion of a Family Limited Partnership is that it is an arrangement by
which business owners transfer an ownership interest to other family members
and yet still control the business.
Moreover, this partnership
consists of two or more family members and is governed by state law. In this partnership, there are two classes of
partners. The first is the General
Partner and then you have Limited Partner(s).
A common split involves the General Partner owning 2% of the partnership while the remaining 98% is
divided among Limited Partners. The
General Partner has the responsibility of running the day-to-day operations of
the business. On the other hand, the
Limited Partners are not involved in the operations of the business. So what are the advantages of this business
entity?
In our next installment we
will discuss the advantages of using a Family Limited Partnership. I think it bears repeating once again how important
to have an attorney, an accountant and a financial planner working in harmony
to not only discuss if a Family Limited
Partnership is in your best interests but also to help you put such an
operation in practice.