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Family Limited Partnership, FLPs / Limited Liability Company, LLCs

These entities often are a cornerstone in satisfying the clients’ goals. A versatile and dynamic structure that, when properly designed, has the ability to:

  • Provide asset protection
  • Give continuity of ownership/business succession
  • Possible estate tax reduction tool
  • Incentive tool to the next generation to get involved
  • Risk spreading

A general highlight of these entities is to leverage the concept of “minority interest discounts”. A simple explanation; if you own less than controlling interest in a business (51%) than the minority interest might not be classified at the full value of estate and gift tax computations. There is no exact formula for the level of discounts because it is a variable number depending on the type of assets, actual gifted amount and others.

Common numbers for properly designed partnerships usually can average 15% for lack of control and 15% for lack of marketability. This is a generalization only, the actual number needs to be vetted with the clients legal counsel, CPAs , appraisers and ultimately acceptance from the IRS.