A family limited partnership is similar to a limited liability partnership; they are both made up of general and limited partners. The one difference that makes a family limited partnership different from a limited liability partnership is the fact that all of the partners are family members, instead of friends or investors.
When it comes to forming a family limited partnership, the steps you need to take to form the partnership are going to be the same steps you would take to form a limited liability partnership, with a few exceptions. The first thing that you will need to do when forming a family limited partnership is prepare the Certificate of Limited Partnership. This certificate is going to ask for the name of the limited partnership and the name of the Agent for the Service of Process. The agent can be any family member that currently resides in the state, the agent needs to reside in the state because they will be the ones being served papers in case the limited family partnership is sued. You will also need to include the names and addresses of all of the general partners; the limited partners do not need to be included. Once you have properly filled out the Certificate of Limited Partnership you will need to file it with the Secretary of State’s office and pay a filing fee of $85 to $125, depending on the state that you reside in.
Once you have filed the Certificate of Limited Partnership your family limited partnership is considered legally formed, even though more steps should be followed to fully form your family limited partnership. After filing the certificate with the Secretary of State’s office you will want to request a certified copy with the filing date stamped open it. Having this copy will enable you to open a business banking account in your partnership’s name; this will also help you to get partnership cards for your business.
Once you have completed the Certificate of Limited Partnership you will need to prepare a written partnership agreement. The partnership agreement does not have to be filed with the Secretary of State’s office in most states, but you will want to check with your state’s filing requirements. Even if the partnership agreement does not need to be filed, it still needs to be prepared because the partnership agreement is going to act similar to the articles of incorporation for a corporation. The partnership agreement is going to govern the rules that your partnership is going to follow, if the rules are not clearly stated in a partnership agreement than state partnership laws will prevail.
When preparing a written partnership agreement for a family limited partnership, certain provisions must be made so that you can protect your assets that belong to your estate. If you do not pay close attention to these provisions, you are not going to be able to accomplish your objectives that are set forth for the family limited partnership. The special provisions that you make in the partnership agreement need to be designed so that a creditor can never gain any influence over the partnerships affairs, but you also want to make sure that you and your spouse, as the general partners, always have complete control over the assets of your partnership.
One thing to remember is that many times family limited partnerships are used for estate planning, so special attention is paid to the family limited partnership by the IRS.
