Estate Planning

You need to speak with an attorney. In this limited space, there is not enough room to go through the differences (other than in a very broad sense), nor to make any recommendations to you, without knowing the particular facts of your situation.

A Family Limited Partnership is a variation of a Limited Liability Partnership. Both of these entities are treated as partnerships for tax purposes. They are "pass through entities" in the sense that there is not a partnership level tax. The individual partners have the income and expenses pass through to them.

A C Corporation is a corporation, and it is taxed at both the corporate level and the shareholder level. An S corporation is a pass through entity, and may be another alternative for you to consider. Earnings and expenses pass through to the individual shareholders on Schedule E.

A limited liability company is also a pass through entity, which is treated as a partnership, but is only taxed at the member level and not the company level.

So there are tax advantages of FLP, LLP, LLC and S Corporations, over C Corporations. What entity is best for you depends on your objectives and the facts of your situation.

James Frederick

Without any facts, it is impossible to give an intelligent answer to your question. (You may also want to consider an LLC as an option.) Consult with an attorney in your jurisdiction to answer these questions for your particular circumstances.


DISCLAIMER: The information in and this communication are not intended to create an attorney-client relationship between you and me or my law firm. The information in this communication is intended for general informational purposes only and should be used only as a starting point for addressing your legal issues. It is not a substitute for an in-person or telephone consultation with an attorney licensed to practice in your jurisdiction about your specific legal issue, and you should not rely upon the information in this communication. You understand that this communication is not confidential and is not subject to attorney-client privilege.

Each legal entity is formed under the laws of a particular state. It is advisable that it be formed by an attorney. The goal is to have assets which are owned outside of the entity to be exempt from liabilities generated inside the entity. It is important to follow all formalities and to adequately capitalize the entity. The entity should also have adequate insurance for all relevant risks. One estate planning strategy involves transferring a business or real estate to a family limited partnership and gifting interests in the partnership to your children. The goal is to reduce estate taxes by qualifying for minority and marketability discounts. The idea is that the fractionalized interests that you give away and the fractionalized interests that you keep have a value that is less than the corresponding fraction of the entity's total value. This discount is determined by qualified appraisals, although the IRS has the right to dispute the discount as well as any appraisals of assets transferred to the FLP.

A Family Limited Partnership can give much better asset protection than a corporation or an LLC. But it is far more complicated, expensive to properly organize and is often highly contested by the IRS after your death regarding Estate taxes. Normally one of the partners will be a corporation or an LLC organized to be the general partner.

As the other attorneys have said you need independent legal counsel. Use of an FLP could be overkill for your situation or it could be the exact tool needed.