Form a Family Limited Partnership

Form a Family Limited Partnership

The University of Connecticut
by B. Patrick O’Donnell Jr., J.D., L.L.M., C.L.U.

For owners of family businesses, the issue of succession invariably becomes a terrible dilemma: How to transfer assets to the next generation while simultaneously maintaining controlover major decisions and avoiding crippling estate tax liabilities.

Growing numbers of owners are discovering a suitable answer in an estate and financialplanning technique known as a Family Limited Partnership (FLP). In an FLP, control lies withthe general partners, who can have a tiny equity ownership (as little as 1%, although 5% is morethe norm) while still retaining control and deciding how much partnership income goes to thelimited partners. The general partners are the decision makers and the limited partners hold mostof the equity. More…

Creating Instant Equity for the Next Generation

Creating Instant Equity for the Next Generation

by Jim Percy

Does the predicament of Coleridge’s ancient mariner, “Water, water, everywhere, nor any drop to drink,” apply to your business? It may apply if the asset at issue is not water, but money. If it does, the use of a private annuity may be the tool that allows your business to quench your thirst.

A common problem in many family businesses is that parents want to retire, but put it off because of their worries about maintaining a sufficient retirement income. These parents often have children who are poised to take over, but lack the funds to buy the business from their parents. This albatross can hang over many businesses, even those that are well-established and profitable, largely because a lion’s share of the family’s assets are in their business. More…