Family Limited Partnership

Paper Summary:

Effective financial planning for many professionals and other affluent taxpayers today requires a thorough understanding of what business forms are available and which are most appropriate for families. These alternatives might include trusts, private foundations, gift programs and family limited partnerships. To this end, this paper provides a review of the relevant literature to determine when a family limited partnership is appropriate. It analyzes the pertinent laws including an examination of the Internal Revenue Code, regulations, case law and other rulings and matters that are relevant to a family limited partnership in general and tax planning in particular. A summary of the research and salient findings are presented in the conclusion.

Outline:
Introduction
Review and Analysis
Analysis and Discussion
Conclusion

From the Paper:

"While laws vary from state to state, many states treat a limited partner's creditor the same as an assignee that therefore has no vote in the partnership and no interest in its management or assets. Consequently, these creditors are only entitled to receive the distributions to which the debtor-partner would be entitled (up to the amount of the debt); however, even in these cases, the partnership agreement can provide that the general partner must reinvest partnership distributions in the partnership for "reasonable business needs" (Dedon, 1991, p. 61). Therefore, these types of creditors may be forced to wait for their distributions while continuing to report and pay income tax on money that has not been received; likewise, creditors of limited partnership general partners do not have any rights to partnership property to satisfy their claims against the general partners (Dedon, 1991). "

Sample of Sources Used:

• Black's law dictionary. (1990). St. Paul, MN: West Publishing Co.
• Burkert, R. P. (2003). A good deal depends on preparation: CPAs can help client-owners of closely held entities tidy up their businesses for a sale. Journal of Accountancy, 196(5), 47.
• Crayne, R. K. (2001). Family limited partnerships funded with personal use property. Journal of Accountancy, 191(4), 76.
• Dedon, J. (1991). Protecting personal assets; It's vital to safeguard personal property before problems occur. Journal of Accountancy, 172(1), 60.
• Ellner, C. (1994). There's gold in the health-reform hills. ABA Banking Journal, 86(2), 62-3.

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