Family Limited Partnerships (FLPs)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 05, 2024

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What Are Family Limited Partnerships (FLPs)?

Family Limited Partnerships (FLPs) are legal entities that allow family members to pool their assets and manage an investment or business together.

FLPs provide benefits such as asset protection, tax savings, and efficient succession planning.

They consist of general partners with management responsibilities and unlimited liability and limited partners with limited liability who do not participate in day-to-day management.

FLPs can be a powerful tool for preserving family wealth and maintaining family involvement in a business across generations.

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Taylor Kovar, CFP®

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I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

Family Limited Partnerships (FLPs) are a savvy strategy for wealth management and estate planning. By pooling family assets into a partnership, FLPs offer control, tax advantages, and asset protection, while smoothly transitioning wealth to the next generation. This setup not only secures your legacy but also cultivates financial acumen within your family. Consider how an FLP can elevate your family's financial strategy.

Contact me at (936) 899 - 5629 or [email protected] to discuss how we can achieve your financial objectives.


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Establishing a Family Limited Partnership

There are legal requirements and other details involved in establishing a Family Limited Partnership.

Legal Requirements and Formation Process

To establish an FLP, several steps must be taken:

1. Selecting a Jurisdiction: Choose the state or country where the FLP will be registered, considering the legal and tax implications.

2. Drafting the Partnership Agreement: This document outlines the rights and responsibilities of the partners, as well as the terms and conditions governing the partnership.

3. Registering With Government Authorities: File the necessary paperwork and fees with the appropriate state or federal agencies.

Choosing the General and Limited Partners

An FLP consists of at least one general partner, who takes on management responsibilities and has unlimited personal liability, and one or more limited partners who have limited liability but do not participate in day-to-day management.

Capital Contributions and Partnership Interests

Partners contribute capital to the FLP in exchange for partnership interests, which represent their ownership and share of the profits and losses.

Advantages of Family Limited Partnerships

There are several advantages to Family Limited Partnerships.

Asset Protection

FLPs offer several benefits in terms of asset protection:

  • Liability Protection for Limited Partners: Limited partners are not personally liable for partnership debts or obligations beyond their investment.

  • Shielding Assets From Creditors: FLP assets are separate from personal assets, making it difficult for creditors to seize them.

Tax Benefits

FLPs provide various tax advantages:

  • Estate and Gift Tax Planning: FLPs allow for tax-efficient transfer of assets to future generations.

Succession and Estate Planning

FLPs are a useful tool for succession planning:

  • Transfer of Assets and Control: FLPs can facilitate the gradual transfer of ownership and control to younger generations.

  • Continuity of Family Business: FLPs provide a structure for maintaining family involvement in the business.

Enhanced Management and Decision-Making

FLPs encourage effective business management:

  • The Role of General Partners: General partners can focus on management without interference from limited partners.

  • Involving Family Members in the Business: FLPs provide a platform for mentoring and training younger family members.

Disadvantages and Risks of Family Limited Partnerships

Family Limited Partnerships also come with disadvantages.

Limited Liability Exposure for General Partners

General partners face unlimited personal liability for partnership debts and obligations, which can be a significant risk.

Complexity and Cost of Establishment

Establishing an FLP involves legal, accounting, administrative expenses, and ongoing compliance requirements.

IRS Scrutiny and Potential Legal Challenges

FLPs can be subject to IRS scrutiny, and improper use can lead to audits or legal challenges.

Family Conflicts and Disagreements

FLPs can exacerbate family disputes, especially if the partnership agreement does not clearly address potential conflicts.


Key Considerations for a Successful FLP

Below are some points to consider so that one can establish a successful FLP.

Drafting a Comprehensive Partnership Agreement

A well-drafted partnership agreement is essential for setting expectations and avoiding disputes among partners.

Maintaining Proper Records and Documentation

Accurate and up-to-date records are necessary for tax, legal, and management purposes.

Periodic Review and Updating of the FLP Structure

Regularly reviewing and updating the FLP can help ensure it continues serving the family's needs and goals.

Seeking Professional Advice and Support

Legal, tax, and financial professionals can help guide the establishment and management of an FLP.

Case Studies and Real-Life Examples of FLPs

There are several excellent real-life examples and case studies of FLPs.

Successful FLPs in Various Industries

Several examples demonstrate the successful use of FLPs in various industries, including real estate, manufacturing, and agriculture.

These case studies highlight the benefits of FLPs in terms of asset protection, tax savings, and efficient transfer of family wealth.

Lessons Learned From FLP Failures

FLP failures can offer valuable insights into potential pitfalls and challenges.

Common issues include inadequate partnership agreements, lack of communication among family members, and failure to adapt to changing circumstances.


Family Limited Partnerships (FLPs) play a crucial role in helping family businesses achieve their objectives and preserve their wealth for future generations.

By offering asset protection, tax savings, and efficient succession planning, FLPs provide a valuable tool for managing family assets and businesses.

However, it is essential to carefully weigh the pros and cons before establishing an FLP and to ensure it is structured effectively to serve your family's needs.

As the landscape of FLPs continues to evolve, staying informed and adapting to the changing legal, tax, and economic environment is crucial.

This may involve updating partnership agreements, reevaluating succession plans, and embracing new technologies and business models.

Ensuring clear communication and education among family members is also vital for the long-term success of an FLP.

To navigate the complexities of establishing and managing an FLP, we recommend consulting with a tax services expert who can provide personalized guidance and support.

Do not miss out on the potential benefits of an FLP—contact a tax services professional today to help secure your family's financial future.

Family Limited Partnerships (FLPs) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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