The lack of control and lack of an outside market for the FLP interests generally mean the interests can be valued at a discount - so greater portions of the business can be transferred before triggering gift tax. They also can’t sell their interests without your consent or force the FLP’s liquidation. What’s more, the future business income and asset appreciation associated with those interests move to the next generation.īecause your children hold limited partnership interests, they have no control over the FLP, and thus no control over the business.
But as general partner, you can still run day-to-day operations and make business decisions.Īs you transfer the FLP interests, their value is removed from your taxable estate.
You retain the general partnership interest, which may be as little as 1% of the assets. You then transfer limited partnership interests to your children. To establish an FLP, you transfer your ownership interests to a partnership in exchange for both general and limited partnership interests. Often, the best time tax-wise to start transferring ownership is long before the owner is ready to give up control of the business.Ī family limited partnership (FLP) can help owners enjoy the tax benefits of gradually transferring ownership yet allow them to retain control of the business. One of the biggest concerns for family business owners is succession planning - transferring ownership and control of the company to the next generation.
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