Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Good afternoon Steve. My name is ***** ***** I will be helping you today! It will take me just a few minutes to type a response to your question. Thanks for your patience!
The benefit of a family limited partnership is asset protection. Putting each property in an LLC is a good first step because it protects each other property and your other personal assets from debt, liabilities and judgments involving one property. But, that alone then leaves your interests in these LLC's at risk for your creditors because although the assets themselves in the LLCs are not directly at risk, the ownership of the LLC's are at risk. So, what you want to do is put the LLC interest in a family limited partnership. A revocable trust simply allows you to avoid probate; it overs no asset protection. Conversely, carefully drafted, a family limited partnership converts assets that a creditor would find attractive to go after into a limited partnership interest with no control, no rights other than that of an assignment, no transferability, no marketability, and no right to distributions. The transfer is for fair market value…i.e., you are simply exchanging one asset for another of equal value to you. And, you maintain control through a general partnership interest that you control. Yet, when complete it essentially is an asset no one wants and thus the creditor is less likely to pursue the debtor.
Thank you so much for allowing me to help you with your questions. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as OK, Good or Excellent (hopefully Good or Excellent). Otherwise, I receive no credit for assisting you today. I thank you in advance for taking the time to provide me a positive rating!
Yes, that is correct. You can never prevent someone from filing a suit. But: i) they are not likely to file suit against an FLP, because even if they win, they have only the rights of an assignee with no rights of control and no ability to ever cause the FLP to ever distribute assets; and ii) filing suit against an FLP doesn't give them any more rights to sue the underlying LLC's.
I have a business loan from a company called On Deck.