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Family Limited Partnership

Family Limited Partnership Structure & Benefits

There is no instrument available today that has withstood attack by lawsuits, creditors, and former spouses better than the Family Limited Partnership (FLP). The Family Limited Partnership consists of One or Two General Partners and a Limited Partner.

GENERAL PARTNER
The General Partner of the FLP can be a parent, parents, a single person, or even a Nevada Corporation. As the General Partner, you are assigned a small interest, usually 1%, which limits your liability in the event of litigation. Although your interest may be small, as General Partner you maintain full control of the assets of the FLP.

LIMITED PARTNER
The Limited Partner of your FLP can be your children, a charity, or even a Living Trust from any state. The percentage interest not assigned to General Partners is assigned to Limited Partner(s). The Limited Partners have no say in the operation or the assets of the FLP and cannot be attacked by your creditors.

TAX REDUCTION
Your FLP can avoid gift and estate tax in a couple of ways. If you assign income from your FLP to your Limited Partner(s) it will be taxed at a much lower rate, than if you had received it. In addition, by giving the children or their trust a limited partner interest, you can reduce overall estate ownership and subsequent estate and gifting tax.

FLEXIBLE ESTATE PLAN
In the long run, the FLP helps you to prolong or even avoid probate costs for your heirs. At the demise of the General Partner(s) the Limited Partner/s automatically become: the new General Partner/s and can choose to dissolve the Partnership at this time, distribute the assets and pay the taxes or they can continue the existence of the FLP to it’s termination date.

ASSET PROTECTION
Asset protection is probably the strongest motivation for establishing the Family Limited Partnership. Its strength discourages attacks from lawsuits and creditors alike.

AN ATTACK ON YOUR NEVADA FAMILY LIMITED PARTNERSHIP
If you are attacked, your 1 or 2 % General Partner Interest in the FLP limits the amount a creditor can obtain from you. In most cases, the cost of a lawsuit is more than a creditor will obtain.

CHARGING ORDER
If a creditor obtains a charging order from a court, the court will likely give the creditor assignee status to your FLP. This means that any distributions such as rental income, interest, dividends, etc. from your FLP must go to pay the creditor. This however, is where the partnership shows its strength.

BUILT-IN PENALTY
Federal Income tax on the amount of a charging order must be paid by the creditor prior to receiving any distributions from the Partnership. Even after the creditor has paid the taxes on the unpaid judgment, the General Partner still has total control of how distributions are made. For as long as the General Partner decides that no distributions will be made, the creditor will continue to receive nothing.

The partnership at this point can sell assets, retain or re-invest it’s proceeds. The law expressively denies the creditor the right to take any interest / management or control of the partnership. Nor can the creditor take any assets away from the partnership.

The risk of paying taxes on money that may never be received becomes too great in most cases for a creditor (plaintiff) to pursue. Never forget that there would also be legal fees that the Plaintiff would need to pay.

No Hidden State fees!

Nevada has pro business and pro individual laws. In other states, it is not only more costly to form a Partnership, there are greater demands and exposures.

TO SET UP A NEVADA FAMILY LIMITED PARTNERSHIP, You are NOT required to:

  • Reside in Nevada
  • Disclose percentages of distribution
  • Disclose names of Limited Partners
  • Disclose an Inventory of your Assets

With these options you gain anonymity and choices unavailable anywhere else.

Included:

  • Preliminary name check to confirm Partnership name availability.
  • Preparation and Filing of Certificate Limited Partnership (State fee included)
  • Preparation and Filing of Initial List of General Partners (State fee included)
  • Required Nevada State Business License and fees (unless exempt)
  • Obtain Tax ID Number (EIN Number) from IRS Preparation and submittal of Federal Tax ID Application.
  • Bank Account setup assistance with free initial checks
  • Nevada Registered Agent address with First Class mail forwarding for first year
  • Meeting Room accommodation at Nevada office
  • Deluxe Nevada Family Limited Partnership Agreement and Certificate of limited partnership.
  • Administration: Ensures that General Partners List is filed correctly and on time with the Secretary of State in Nevada.
  • Property transferal assistance for up to 2 properties to be put into the Nevada Family Limited Partnership.