Why Should We Use an FLP
The first question to ask is why are we using an FLP? Is it more advantageous than any other type of entity?
The FLP has certain unique attributes that are beneficial for both asset protection and estate planning. It needn’t be used to the exclusion of other entities such as corporations, LLCs, and trusts. In fact, it is often combined in a plan with one or more of the others. The proper role of the FLP is often to act as a holding company, owning certain assets and interests in other entities. In this way it can be the foundation of a solid plan. The distinguishing features of the FLP are pass-through taxation and a split in management rights between general and limited partnership interests. The combination of these two characteristics makes the FLP a flexible and efficient vehicle for many types of planning. Sometimes a corporation or LLC can be substituted and may be more appropriate in certain circumstances, but as a general rule the FLP performs well in this arena.