Family Limited Partnership (Definition)

The Family Limited Partnership is a legal entity formed under a state's Limited Liability Partnership Laws. FLPs are limited partnerships owned and operated exclusively by family members. A family can use an FLP to accomplish many things. Parents can use an FLP to transfer the family business and other assets to their children while still maintaining control over it all. They can use the FLP to hold life insurance, to fund trusts, and to reduce estate and gift taxes.

A Family Limited Partnership limits the partners to (1) family members, (2) trusts created for family members, or (3) corporations privately owned by family members.

Families can cancel an FLP at anytime before its scheduled termination. However, all partners must unanimously consent. All of the assets in the FLP will be transferred back to the parent’s direct ownership without penalties.