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The Many Uses of a Family Limited Partnership - Part II

 

Two Types of Interests

Two types of interests, or units, make up the partnership.

  1. General partnership interest
  2. Limited partnership interest

Typically, the General Partner interest comprises 2% of the partnership, and the Limited Partner interest is the remaining 98%. Initially, the parents split the partnership in half. Each parent will have 1% interest as a General Partner and 49% interest as a Limited Partner.

General Partnership interest entitles the general partners to all the management responsibilities and unlimited liability. General partners may make provisions in the FLP to receive an income for managing the partnership.

Limited Partnership interest entitles the limited partners to no management responsibilities and limited liability. The only thing a limited partner stands to lose is his or her initial investment. Limited partners cannot demand that the general partners make cash distributions from the partnership's income each year. However, the limited partners must pay taxes on the income whether or not they receive distributions.

Limited Partners vs. General Partners

Limited Partners

General Partners

Part I >>
Part III >>

 

 

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