Limited Partnerships vs. LLCs: Asset Protection Strategies

Every real estate investor knows that one lawsuit can wipe out years of hard work. That’s why choosing the right legal structure is critical for protecting wealth, minimizing risk, and preventing creditor claims.

Most investors consider two main options:

✅ Asset Management Limited Partnerships (AMLPs)

✅ Limited Liability Companies (LLCs)

Both provide liability protection and tax benefits, but they have key differences when it comes to asset security.

Let’s follow Mark and Sarah, two high-net-worth real estate investors, as they decide whether an AMLP or LLC is the right fit for their asset protection plan.

Mark & Sarah’s Asset Protection Dilemma

✔ Mark is a surgeon—his biggest risk? Medical malpractice lawsuits.

✔ Sarah is a real estate developer—her biggest risk? Tenant lawsuits & business liabilities.

With multiple properties and investments, they needed a solid legal structure to protect their financial future.

“Should we form an LLC or an Asset Management Limited Partnership (AMLP)?” Mark asked.

To get answers, they consulted an asset protection attorney who broke down the differences.

What Is an Asset Management Limited Partnership (AMLP)?

An AMLP is a powerful legal structure used for:

✔ Real estate holding and estate planning

✔ Shielding financial assets from lawsuits

✔ Maintaining family wealth across generations

How AMLPs Work:

🔹 General Partner (GP): Retains full management control.

🔹 Limited Partners (LPs): Passive investors with no control or liability beyond their investment.

💡 Example: If a creditor sues an AMLP, they cannot seize the assets inside it—they can only place a charging order on distributions.

How AMLPs Protect Real Estate Investors from Lawsuits

Mark and Sarah’s attorney explained a key legal protection of AMLPs:

📌 Charging Order Protection

✔ Creditors cannot seize assets—only lien future distributions.

✔ The general partner controls when (or if) distributions happen.

✔ In many cases, creditors never collect anything.

📌 Relevant Legal Case: NextGear Capital, Inc. v. Owens (2023)

🔹 The court upheld charging orders as the exclusive remedy against partnership interests.

Sarah was impressed:

✔ “That sounds like a nightmare for creditors. No wonder wealthy families use AMLPs.”

What Is a Limited Liability Company (LLC)?

LLCs are one of the most common legal structures for business owners and real estate investors.

✔ Provides limited liability protection—separates personal assets from business debts.

✔ Pass-through taxation—avoids double taxation like corporations.

✔ Flexible ownership structure—no restrictions on members.

Key Differences: AMLP vs. LLC for Asset Protection

Mark and Sarah compared how AMLPs and LLCs protect real estate investors:

💡 Key Takeaway: AMLPs offer stronger protection because they make it harder for lawsuits to access assets.

When Should You Use an LLC Instead?

While AMLPs provide better lawsuit protection, LLCs still serve an important purpose.

✔ Rental properties

✔ High-risk business assets

✔ Boats, planes, and other liability-prone assets

Sarah’s takeaway:

✔ “An LLC is better for riskier assets, but our financial wealth should be in an AMLP.”

The Ultimate Asset Protection Plan: AMLP + LLC + Trust

Mark and Sarah’s attorney recommended a multi-layered strategy:

1️⃣ AMLP holds their financial assets—protected from lawsuits.

2️⃣ LLCs hold high-risk real estate and business assets.

3️⃣ A Bridge Trust® acts as the ultimate backstop for global asset protection.

💡 This structure ensures:

✔ Wealth is preserved in the AMLP.

✔ High-risk assets stay separate in LLCs.

✔ Offshore trust protection is available if needed.

Key Takeaways: AMLP vs. LLC for Real Estate Investors

✔ AMLPs offer superior lawsuit protection—creditors can’t seize assets.

✔ LLCs are flexible but weaker against creditor claims.

✔ Using AMLPs & LLCs together creates the best asset protection plan.

💡 If you’re serious about protecting your real estate wealth, structure your assets correctly from the start.