Under unusual circumstances, such In the event that the general partners die or file for bankruptcy, most limited partnership agreements give the limited partners the right to elect a new general partner. A limited partner cannot take assets from the partnership or otherwise force the liquidation of the partnership before its term is up.
The major costs associated with FLP’s are the attorney’s fees incurred to set up the partnership. They can usually run between $2,000 and $7,000 depending on the nature of the business assets. Appraisal fees to establish both the underlying value and the appropriate discounts, can cost between $5,000 to $15,000. There will also be annual accounting fees for preparation of the partnership returns. The state may also charge an annual fee for the right to do business as a limited partnership in the state.
However, due to the costs of establishing FLP’s and the appraisal costs associated with making multiple transfers of the limited partnership interests they usually are not recommended unless the parents owning the business have a net wealth in excess of two or three million dollars. Most state laws restrict the sale of most limited partnership shares.In addition, the transfer of limited partnership shares may be further restricted by the partnership agreement. Even though family limited partnerships offer many benefits, they also have some disadvantages. It is important to thoroughly discuss these issues with a business attorney who is familiar with this entity in order to determine whether a family limited partnership is appropriate as an estate planning vehicle.
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