Family Office Definition: Family Limited Partnership
Family Limited Partnership definition: The family limited partnership is a legal entity with general partners and limited partners. A family limited partnership is similar to a limited liability company (LLC). Investment or business assets are held by the family limited partnership for management. Family members own shares of the partnership and can transition wealth between generations by gifting or transferring shares. The general partners (usually the parents) have the most control but also fully bear the liabilities, while limited partners (usually the next generation) have little control and are not responsible for liabilities. Family limited partnership shares owned by the deceased are included in the taxable estate; however shares are generally discounted in value because of their illiquid nature. The discounted valuation reduces the size of the taxable estate and transfer taxes due when gifting or bequething shares to heirs. Generation skipping transfer taxes may apply when shares are transferred to a skip generation. Shareholders must also pay income taxes on their portion of partnership income.
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