A Family Limited Partnership (FLP) is a way for family members to come together and invest money in a business, like buying real estate or starting a company. Each family member puts in money and gets a share of the business.
FLPs are often used as part of broader family asset management services to help manage and grow wealth across generations.
How It Works:
- Everyone shares in the profits based on how many shares they own.
- The rules for how the business runs and how profits are shared are written in a legal agreement.
Two Types of Partners
General Partners
- Run the business and make day-to-day decisions.
- Can be held personally responsible if the business goes into debt or has legal problems.
Limited Partners
- Only invest money; they don’t manage or make decisions.
- They can lose their investment, but not more than that.
| Example: How an FLP Is Set Up?
Let’s say someone wants to build a luxury apartment building that costs $1 million. They need $500,000 upfront. Instead of borrowing all the money, they create an FLP with their family.
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Why Families Use FLPs?
FLPs are often used to:
- Build wealth together as a family
- Transfer money or assets to children or grandchildren without big tax bills
Gift Tax Benefits:
Every year, a person can give away FLP shares worth a certain amount without paying gift tax.
In 2025, that amount is $19,000 per person or $38,000 per couple.
Estate Tax Benefits:
If assets are moved into the FLP, they’re no longer counted in your estate, which can help avoid estate taxes later.
Future income from those assets goes to your kids or grandkids instead.
| Example:
If a couple has $5 million and gives shares of the FLP to their 3 kids and 9 grandkids, they can give away up to $456,000 per year without gift taxes. |
Rules to Protect Family Wealth
You can include rules in the FLP like:
- Shares can’t be sold until a child turns a certain age.
- Shares for minors can be held in special accounts (UTMA accounts) until they grow up.
Downsides of FLPs
- It can be expensive to set up. You’ll need lawyers. family wealth advisor, and tax experts.
- There will be ongoing expenses. You might need help managing taxes and business details.
- If the general partner mismanages things, the business could lose money, and partners might face debt or other financial issues.
- If not set up or managed properly, you could lose tax benefits.
Finally…
An FLP is a way for family members to invest together and save on taxes. It’s especially useful for passing on wealth to kids and grandkids.
But because it’s complex and has legal and tax rules, it’s smart to get advice from a professional before starting one.
Frequently Asked Questions
What Is a Family Limited Partnership (FLP)?
A Family Limited Partnership is when family members put their money together to run a business — like buying property or investing in a project. It’s also a smart way to reduce taxes and grow family wealth over time.
Is It Costly to Start and Run an FLP?
It can be expensive. You’ll likely need to hire a tax expert or estate planning lawyer to set everything up the right way. You may also need ongoing help to manage the business and handle taxes properly.
How Many People Are Needed to Start an FLP?
You need at least two family members to start an FLP. One or more of them will be in charge of running the business — they’re called general partners. The others can just invest without being involved in day-to-day operations — they’re called limited partners.