LLC Versus Limited Partnership

If John and Mary form a limited partnership to hold the property, one or both of them may serve as general partner. Since the general partner has unlimited liability for the debts of the partnership, if a liability arises out of the operation of the building, the general partner’s assets will be exposed to that claim. The major problem with the limited partnership format is this unlimited liability of the general partner. To avoid this problem, an LLC could serve as general partner of the FLP—this is really a synthetic LLC since no person has legal liability under this arrangement. There may be valid reasons to create a structure like this, but often, simply using the LLC as the only entity will be most efficient and convenient.