A Family Limited Partnership (FLP) is a business entity created to hold family assets—such as real estate, closely held business interests, or even marketable securities. It is a powerful tool for centralizing management, protecting assets from creditors, and transferring wealth to the next generation at a discounted value.
Structure and Control
An FLP has two types of partners: General Partners (usually the parents) and Limited Partners (usually the children or trusts for their benefit). The General Partners retain 100% control over the assets, investment decisions, and distributions, even if they own only 1% of the partnership.
Important
The Power of the General Partner
As a General Partner, you can gift 99% of the FLP to your children as Limited Partners, yet you still decide if, when, and how much income is distributed to them.
Valuation Discounts
The true magic of an FLP lies in valuation discounts. Because Limited Partners have no control over the assets and cannot easily sell their shares (lack of marketability), the IRS allows the value of those limited partnership interests to be discounted—often by 20% to 40%—for gift and estate tax purposes.
20%
Key Figure
Because Limited Partners have no control over the assets and cannot easily sell their shares (lack of marketability), th