A family partnership (FLP) and Family Limited Liability Company (FLLC) are vehicles designed to hold and manage assets that otherwise would be held and managed by individual family members. Quite obviously, only family members — or entities controlled by them (e.g., revocable living trusts or business entities) — will be the partners or members of the FLP or FLLC.
These entities are used for both business and estate planning purposes. The IRS and State taxing authorities, however, have not let this go unnoticed. As such, treasury rules and taxing laws closely scrutinize business adjustments which have the tertiary effect of transferring ownership of family assets to a younger generation without a substantial loss of control to the transferor.
Most importantly, however, is the fact that the use of FLPs and FLLCs allow families to easily transfer the family business from one generation to the other seamlessly. It also has the added effect of being able to clearly assign role and responsibilities of the business to family members depending on the members’ skills and interests.
Because of the tax, non-tax, business, and estate planning advantages of FLPs and FLLCs, it is certainly worth considering if you have a healthy amount