How does a family limited partnership work and steps in setting it up. This notion is actually a complex one, but it is a highly sought-after concept.
There are a lot of frequently asked questions about the concept of FAMILY LIMITED PARTNERSHIP, seemingly, the most sought after is the merits and benefits of venturing into it.
This article is aimed at quenching that fire of curiosity, but first, we are going to be discussing the whole concept concisely.
FAMILY LIMITED PARTNERSHIP.
What is a family-limited partnership???
This hypothesis often shortened as “FLP” is a kindred or family business setting projected at forming a shield to cover the family’s fortune, wealth, and assets. It is usually anchored by two or more families, a form of mutual long-term project pioneered and endorsed by the families involved to ensure the continuity of financial buoyancy and freedom in their bloodline.
Each prominent member of the families involved possesses a share or unit of the business. They invest monies to fund projects in order to generate huge returns, this way, they get to increase their wealth and ensure wealth transfer to their future generations following a uniform sequence and continuity.
This setting shares slight similarities with the limited liability companies setting. They tend to own a truckload of assets, stocks, and fortunes.
The families involved establishing an infallible foundation. They set legacies, they make rules that they are expected to follow, rules that their offspring must follow, and make their own progeny follow.
Basically, there are two commonly outlined types of partners in the Family Limited Partnership, they are:
General partners, and Limited partners.
The general partners often own the largest cut of the business, they participate actively in the decision-making and regulations enacting in the business, they own the lion’s share/stock and responsibility of the business, and they have little or no limitations and hindrances in the business. They oversee all financial and cash activities of the business’s daily transactions.
The limited partners own the smaller or meager cut of the business, their privileges are limited, their decision-making right is frail and feeble, and they have no overseeing or management obligations. They only bought and own shares in the business for the returns and dividends that will be made after successful business transactions.
Setting up a family-limited partnership is relatively very expensive, its maintenance is another thing that will obviously consume a lot of money, most times, this factor makes the idea quite discouraging.
The risk-bearing is also a huge hill to climb, the fear of the entire setting crumbling and going down on its knees is quite scary and discouraging too.
Its complex and complicated structure makes it seem more difficult and horrifying to venture into. Of course, who wouldn’t find it horrendous and a little dreadful to invest a huge amount of money into setting up a business afresh??, No one, I guess.
But amidst all those discouraging seeming pessimistic views of setting up a Family Limited Partnership, there are juicy reasons to want to venture into this concept.
This leads us to write about the main objective of bringing forth this manuscript, which is the merits and benefits of venturing into this theory
THE ADVANTAGES OF SETTING UP A FAMILY-LIMITED PARTNERSHIP.
There are numerous benefits incurred from anchoring an FLP. Some very crucial benefits of this are:
– Shielding of fortunes and properties.
– Wealth procreation and regeneration.
– Wealth conservation and transfer from one generation to another.
– Huge returns and an infallible bond between distinct families.
Fortunes And Properties Shielding:
Building an institution like the FLP ensures the safety of assets and stocks.
Assets under the family limited partnership guidance cannot be exploited indiscriminately, it remains untouched without any kind of trespassing unless authorized access is issued.
Wealth and fortunes protection is best done under this institution, protected better than assets under individual entities. Allegedly, this factor is a cogent reason why people conceive the idea of pioneering or being part of an FLP.
It aids in the protection of assets’ market value, this is because properties signed under the Family Limited Partnership Umbrella attract more traffic if it ever gets auctioned in the future.
Wealth Procreation And Regeneration:
It is purely logical to assume that enrolling in an FLP movement doubles the participants’ wealth and ensures more buoyancy in their financial and monetary status. The more you invest, the more returns you generate, adding to one’s cash worth and value.
Individuals like the General partners who own larger shares tend to generate and regenerate bigger amounts of dividends and bonuses making their worth sky-high.
Basically, it is ideal for families to go into activities that ensure their Fortune’s binary fission.
Wealth Conservation And Transfer From One Generation To Another:
It is one thing to shield assets, it is another to conserve the assets. Fortune preservation ensures its continuity, and that is one of the numerous obvious benefits of an FLP. It ensures that the participants’ fortunes are preserved in solidarity and made surplus.
Conserved wealth gives rise to generational wealth… It is the utmost dream of every family to build an empire, an infallible and indestructible financial legacy that will be passed on from generation to generation, the FLP enacts and endorses this kind of dream.
Oftentimes, the families involved in this setting tend to reach a monetary horizon owing to the fact that their fortunes are properly guided, conserved and increased, making their future and that of their kindred brighter and easier with minimal struggles.
Huge Bonuses and an Infallible bond between distinct families:
Famous family business tycoons and plutocrats become strong allies of one another when they build an FLP empire together, their relationship gets strengthened and made solid, and they support each other even outside business grounds… This kind of solidarity between the different families can last for centuries without getting cracked. They become solace and talisman when things don’t go too smooth for one of them.
This is one of the most important reasons families opt for this kind of business setting. It is one of the great advantages that the FLP empire offers too.
It doesn’t actually stop here. A family limited partnership can also be branched into A FAMILY LIMITED LIABILITY COMPANY which avails more juicy and legal merits.
It is vital to note that the Family Limited Partnership empire is an entirely legal organization with all forms of legal formalities put into place