When you are devising a financial plan as a business owner, you should take asset protection into consideration. There are litigious types out there who look for successful targets, and you have to be proactive if you want to make sure that your assets are protected from legal actions.
With the above in mind, we will look at family limited partnerships in this blog post.
Asset Protection for Business Owners
While anyone can be sued, certain people who are involved in businesses may be more vulnerable. Landlords would fall into this category. Tenants or visitors could potentially get injured on rented property, and this would be a constant risk.
Asset protection is also important for physicians and other professionals. Doctors are viewed as “deep pocket targets” by litigious types, and malpractice suits are not uncommon.
The legal device called a family limited partnership could potentially provide a solution. If you establish a family limited partnership, you would be the general partner. You could also name people in your family to act as limited partners.
The general partner has complete and sole decision-making authority, so you would have total control of the decision-making process.
If you were to convey a business that you own into a family limited partnership, it would no longer be in your direct personal possession. As a result, if you are a landlord, and you place an apartment complex into the partnership, your personal assets would be protected if someone was injured in that apartment building.
This strategy can be implemented on multiple levels. Let’s say that you are a landlord who owns five different shopping centers. You could place each different shopping center in a separate family limited partnership, and you would be limiting your exposure to legal actions.
All of the other centers would be out of play if someone was to sue the partnership that owned one of the shopping centers.
There is also personal asset protection among partners. If someone in the partnership was to be the target of a legal action, the assets in the partnership could not be attached, and this is another asset protection benefit that you gain when you create a family limited partnership.
A family limited partnership can provide an asset protection solution for business owners, but the benefits do not stop there. These partnerships can also provide estate tax efficiency for high net worth families.
Assets can be transferred among partnership members at a tax discount, and you could potentially use the annual gift tax exclusion to provide family members with shares in the partnership tax-free.
We have passed along some basic information in this blog post, but you can obtain more in-depth information about family limited partnerships if you download our special report.
The report is free, and you can click the following link to access your copy: Family Limited Partnership Report.
Latest posts by Timothy P. Murphy (see all)
- Is It Hard to Contest a Will? - January 15, 2019
- What Are the Rules of Intestacy in California? - January 13, 2019
- Estate Planning for Adult Children Suffering from Alcoholism - January 11, 2019