Family Limited Partnerships

I'm looking for the best way to incorporate to provide the best asset protection for my investments. I sat through an Asset Protection presentation a few years back that mentions FLP (Family Limited Partnerships) are one of the strongest ways to structure your corporation.

Any one have any feedback or experience with this? I'm also looking for experienced REI focused attorney's to work with.

Edited: 06/26/2010 at 07:28AM

Alex G

Real Estate Investor · Levittown, New York

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Icon_minipost Mar 09 '09, 02:53 AM

Any feed back would be great. How do you guys structure your LLCs? Does anyone have any focus on Asset Protection?

Edited: 06/26/2010 at 07:31AM

NC Mark

Real Estate Investor · North Carolina

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Icon_minipost Mar 09 '09, 04:56 AM

An attorney who specializes in estate planning in your state would be the best bet.

My family has an LLC and not a FLP. I have no idea what the difference is, but I'm not about to second-guess my expensive attorney.

Edited: 06/26/2010 at 07:31AM

Christian Malesic

Real Estate Investor · Harrisburg, Pennsylvania

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Icon_minipost Mar 09 '09, 10:21 PM

An FLP is a way to protect your wealth once you have it. If you are just starting out, this would not be the way to go as the fees and such will be way too high.

Set up an LLC or Sub S Corp. At a later date, when you are wealthy, you can sell or donate this company into your newly formed FLP.

Edited: 06/26/2010 at 07:31AM

Greg Boots

Real Estate Attorney · Seattle, Washington

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Icon_minipost Mar 13 '09, 10:12 AM

I would use an LLC for your holds. Greater flexibility in management and asset protection.

If you use an LP for your rentals and you are the general partner you will open yourself up for unlimited liability exposure associated with the property. Another downside with an LP is that if you are the passive limited partner you will lose your ability to capture your annual depreciation from your holds.

Edited: 06/26/2010 at 07:34AM

Christian Malesic

Real Estate Investor · Harrisburg, Pennsylvania

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Icon_minipost Mar 16 '09, 01:21 AM

There are many threads which compare and constrast LLC vs. Sub chapter S Corp. I encourage you to read those older threads and then add to them any new questions you may have.

I agree that an LLP is probably not the best option. These are questions for both your lawyer AND your accountant once you get it narrowed down to 2 or 3 options.

Edited: 06/26/2010 at 07:35AM

William Bronchick

Real Estate Attorney · Aurora, Colorado

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Icon_minipost Jul 20 '10, 01:03 AM

The FLP is more of an estate planning device used in conjunction with LLCs and corporations.

While every situation and every client is different, here's how it might look:

Hold your rentals in multiple LLCs, all of which are owned by a master FLP.

The LLCs give liability protection while the FLP is an asset protection/estate planning tool.

I think FLPs are starting to fade out as LLCs become more popular. The FLLC (Family LLC) is starting to replace the FLP. They are sort of the same thing, but the LLC offers more flexibility.

In some states (TX, CA), the franchise tax is lower on FLPs so they are still common.

And, by the way, don't rule out an S corporation for your flipping activity.