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Limited Partnerships
Why Form a Limited Partnership?
Protect your personal assets:
Forming a Limited Partnership, is another way for business owners to protect their personal assets. A Limited Partnership has one or more General Partners and one or more Limited Partners. Like partners in a General Partnership, the General Partners have unlimited personal liability for the acts and debts of the Limited Partnership. For that reason, we only recommend having an entity, such as a corporation or LLC act as a General Partner when we set up a Limited Partnership. Like shareholders of a corporation, all Limited Partners are protected from personal liability for business debts and claims.
Tax advantages:
Unlike a corporation, a Limited Partnership is not considered separate from its owners for tax purposes. Limited Partnerships are treated as “pass-through” entities meaning that Limited Partnerships can avoid double taxation since business income pass through the business to the Partners (limited and general), who report their share of profits or losses on their individual income tax return. The Limited Partnership itself does not pay taxes.
Estate Planning Aspects
Limited Partnerships can be used as valuable tools in estate planning, permitting a business or real estate owner to transfer assets to the next generation without giving up control of the assets.
Flexibility:
Limited Partnerships provide greater flexibility in management and organization of the company. Limited Partners can enjoy the benefits of pass-through taxation while leaving control of the Partnership with the General Partner(s).
Recommendations:
Limited Partnerships are especially beneficial for real estate investors as it is one of the best means for holding real estate and other assets. The one caveat here is to use an entity as the General Partner.
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