What is a family limited partnership (FLP), and what is its purpose?
What will be an ideal response?
A family limited partnership (FLP) is a limited partnership that is formed to hold family businesses or investments. There are no state statutes that provide for the formation of FLPs. An FLP is a limited partnership that has been formed by family members to pool together a family's assets into a single limited partnership that is owned by family members. FLPs are used to centralize a family's businesses and investments into a single entity. Generally, senior family members, such as parents or grandparents, who have substantial assets, are the general partners who contribute assets to the FLP and manage its business and assets. The children or grandchildren are usually the limited partners. The general partners give all or a portion of their assets to the FLP in exchange for a small general partnership interest and a large limited partnership interest. Over time, they can give their limited partnership interests to their children or grandchildren, and upon death can distribute the remaining partnership interests to their children or grandchildren. There are important gift tax and estate tax benefits for using FLPs.
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