Reading Time: 1 minuteIf you’re planning to pass ownership in your business to the next generation, it’s critical to find the best way to do so. One option is a family limited partnership (FLP).
To implement this strategy, you set up a limited partnership and transfer ownership interests to it. Then you give some or all of the limited partnership interests to your heirs.
Control of the FLP remains with the small percentage of partnership interests known as “general partnership interests,” of which you retain ownership. Thus, you reduce your taxable estate by giving away assets (the limited partnership interests) without giving up control of the underlying assets. In other words, you can continue to run your business.
Because the limited partners lack control, these interests can often be valued at a discount. When making a gift of an FLP interest, obtaining a formal valuation by a professional appraiser is essential to establish the value of the underlying assets and partnership interests.
A major risk of FLPs is IRS scrutiny. The agency often challenges FLPs it believes are invalid. That’s where we come in. We can help you establish and maintain a sound, defensible FLP. Please contact us.