The Family Limited Partnership - Is it Right For You?
Is the family limited partnership the right legal model for your home based business? To understand this entity better, let us look at a few basic definitions. A limited partnership or family limited partnership is a legal business entity that involves two classifications of partners. The first is the general partner and the second is the limited partner or partners. It is important for you to understand the different roles that each of the partners relative to this illegal entity have.
The first being the general partner is the partner that is in control over all of the functions of the business. Liability is the major issue for the general partner as he or she is personally liable for the actions of the business. On the other hand, the limited partner has no control of the actions of the business and further has no personal liability involvement.
Many people will shy away from the limited partnership concept due to the liability issues discussed previously. But, don't get discouraged as there is a legal way to avoid the personal liability of the general partner. The way to accomplish this is to combine legal entities so that you can maximize the benefits and minimize the liabilities. You can accomplish this by making another legal entity the general partner. Legal entities are not subject to personal liabilities whereas individuals are subject to personal liabilities.
The most common legal entity available is the Nevada Corporation. Combining these two types of legal entities will complement each other and will also provide asset protection.
Once the limited partnership is formed, there are many advantages to this legal entity. Most important is that limited partners are not responsible for any debts that the partnership might occur. There are no restrictions on the number or the qualifications of the limited partners. This is in contrast to corporations that have restrictions on the qualifications of the share holders. Limited partners are protected from personal creditors. Partnerships do not pay taxes as opposed to corporations. Other advantages to the limited partnership is low cost start up fees and low cost annual filing fees.
If you are considering a limited partnership, you will find help in the areas of tax reduction, estate planning and asset protection.
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Source: http://ezinearticles.com/
Added: September 4, 2008
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