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By Paul D. Brick, CFP® , Financial Advisor
Stambaugh Ness Financial Strategies

Making your children owners of your business is fraught with business and tax issues but emotional issues as well. It's difficult to turn over ownership and control of a business you created and built over many years. In addition, no parent ever wants to be beholden to their children.

So what should you do?

Consider creating a family limited partnership. It works this way: First, a new entity is created called the XYZ Family Limited Partnership. In that entity, you contribute the ownership of your business and generally take back a small general partner interest and the balance as a limited partner interest. 

As you may know, whoever owns the general partner interest controls the company. So, it's possible to own 1 percent as a general partner and control the entire company - even though the limited partners own 99 percent. 

Next, you start a gift program of the limited partnership interests to your children. Each year, you gift shares in the family partnership. Your children can also purchase shares.

The benefits of this program are numerous. Your children get ownership while you maintain control. It's an easy method to transfer ownership because you transfer the limited partnership interest, not the underlying assets. Plus, you reduce your estate tax liability.

Note: This example is an oversimplification. The issues and options are numerous and must be considered carefully. Keep in mind that there are many other ways to admit children to your business - this is just one idea.

Contact Paul if you have questions about creating a Family Limited Partnership. We have a significant amount of experience in this area and can help guide you through the maze. You may contact Paul at 717-757-6999 or 800-745-8233 or send an email to him by using the form below.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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