Part Two

Appoint an accountant to prepare the appropriate tax returns for the FLP (Form 1065).  Although the Family Limited Partnership is treated as a “flow-through entity”, these returns are informational type returns that are required to be filed accurately and timely.

Make sure distributions from the Family Limited Partnership are made to the partners in accordance with their individual partnership percentages.  Additions made to the partnership should be done by the partners in agreement with their respective partnership percentages at the time of the addition.  The general partners must be careful to not pass on any assets out of the Family Limited Partnership without consulting with competent legal counsel.

Ensure personal obligations and expenses acquired by partners are satisfied from such partners’ personal nonentity accounts, never from entity accounts.

Be certain that the Family Limited Partnership entity remains active in its state of formation.  Such active status should be maintained by payment of registered agent fees and satisfaction of any state tax requirements (i.e., payment of franchise tax, filing of annual reports, etc.) on a timely basis.