The differences between Family Limited Partnerships and General Partnerships
Although family limited partnerships (FLPs) have been used for the management of family property and businesses for a number of years, they have recently drawn widespread attention as a means of obtaining valuation “discounts” for federal gift and estate tax purposes. In a general partnership, all partners have a voice in the management of the partnership and all partners are held personally liable for their pro-rata share of the partnership’s debts and obligations.
In an FLP, however, there are two classes of partners: the general partner(s) and limited partners. The general partners run the partnership and make all the decisions regarding the partnership, except to the extent restricted in the partnership agreement. On the other hand, limited partners are more like silent investors having little or no control over day-to-day operations of the partnership. As a result, general partners are personally liable for the partnership’s debts and obligations while limited partners are not.
Family Limited Partnerships