A family limited partnership (FLP) is a business or holding company owned by two or more family members. It offers the family opportunities to use all of their collective talents, resources and know-how for the benefit of their collective estate. This is a great way for family members to combine their assets, create an empire and protect their wealth from taxation and other potential losses.

A family limited partnership (FLP) allows two or more family members to invest their capital in a business venture that can be managed and controlled by them. The partnership structure specific to FLPs offers numerous advantages, including tax savings through the use of annual gifts and the ability to pass assets and holdings to the next generation without being subject to estate taxes.

FLPs also provide family members with more diverse investment opportunities and protections. In the FLP, each family member can buy shares in the venture for a potential profit. There are two types of partners in a family limited partnership: general partners and limited partners.

General partners in a family limited partnership have greater control since they usually manage the business. They also have unlimited legal liability. Limited partners on the other hand, have minimal control of the investments but they also have limited legal liability. Limited partners are not expected to actively manage the business and instead, can rely on the expertise of the general partners.

Another benefit of a family limited partnership is that family members can transfer their assets to the FLP without incurring any taxes. Since the asset transfers do not exceed the gift tax rate, it is possible to transfer large amounts of assets without incurring taxation. This makes the transfer of wealth easier and more efficient across generations.

The key advantage of a family limited partnership is that it provides a platform to preserve and grow the family's generational wealth. It offers tax-free transfers of assets, real estate and other valuable family holdings, allowing family members to protect their wealth from taxation and other potential losses over time.

Though there are many advantages to creating an FLP, there are some possible drawbacks. FLPs are structured legally and formally, and can be costly to form and maintain. The document is usually a complicated one, and the yearly paperwork can be time consuming. The partnership can also be liable for income, gift, estate and job taxes and the state has several taxes that can be imposed. Additionally, the limited partners in the FLP might have to follow certain specific rules and guidelines, as specified in the partnership agreement.

Overall, a family limited partnership (FLP) offers a powerful platform for preserving wealth across multiple generations. By combining the expertise and resources of multiple family members, the FLP can provide the family with the financial, legal, and tax protection necessary to protect their assets and create strong generational wealth.