Family Limited Partnership - What Is It?

Auguest 1, 2004
By Richard Smith, LLB

A family limited partnership (FLP) is a limited liability partnership like any other, apart from the fact that the general partners in the FLP are all members of the same family.

In effect, what this entails is your family setting up a limited liability partnership, where each member of the family is considered a general partner of the partnership. Of course, not all members of the FLP need be equal! Indeed, it is likely that the older members in family limited partnerships are going to have a greater percentage ownership in the FLP - as they have (usually) brought a higher amount of assets to the FLP.

For example, you may have Dad owning 40 per cent, Mum owning 30 per cent, sister owning 15 per cent and you owning 15 per cent of the FLP.

Family Limited Partnership - The Benefits!
Determining if an FLP is for you depends on what your family's total estate assets are. Essentially, if your family have better than average assets, then an FLP may be just the thing for you as it lets you keep the assets in the family, but you still retain control over the assets - a bit like having your cake and eating it!

The reason for this is because when you put your family assets in the name of a limited partnership, those assets are automatically afforded certain protections. For example, if one of the members of the family is ever sued, their assets will be protected from seizure as they're part of the assets of the FLP. Likewise, FLPs are a useful tool if you plan on remarrying, where you have children from your previous marriage, as your new spouse cannot claim a right to the assets of the FLP if s/he were to divorce you in the future.

It is for these reasons that limited partnership are rapidly becoming more popular among families as become richer and need to protect those riches for the next generation.