Is a Family Limited Partnership the Right Legal Model for Your Home Business? To better understand this entity, let’s look at some 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 that you understand the different roles that each of the partners has in relation to this illegal entity.
The first, who is the general partner, is the partner who has control of all the business functions. Liability is the main issue for the general partner, as he or she is personally responsible for the actions of the company. On the other hand, the limited partner does not have control of the shares of the company and, furthermore, he does not have any personal liability.
Many people will shy away from the limited partnership concept due to the liability issues discussed above. But don’t be discouraged, as there is a legal way to avoid general partner personal liability. The way to achieve this is to combine legal entities so that you can maximize profits and minimize liabilities. You can accomplish this by making another legal entity the general partner. Legal persons are not subject to personal liability, while natural persons are subject to personal liability.
The most common legal entity available is Nevada Corporation. The combination of these two types of legal entities will complement each other and also provide asset protection.
Once the limited partnership is formed, there are many advantages to this legal entity. The most important thing is that the limited partners are not responsible for any debts that may arise with the partnership. There are no restrictions on the number or qualifications of limited partners. This is in contrast to corporations that have restrictions on shareholder ratings. Limited partners are protected from personal creditors. Corporations do not pay taxes unlike corporations. Other advantages for the limited partnership are low-cost start-up fees and low-cost annual filing fees.
