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Assets in a Family Limited Partnership

Any type of business or investment asset can belong to an FLP. Assets related to an operating business, such as a store or ranch, work particularly well. But some families set up an FLP solely with investment-type assets. When deciding how to fund the partnership, it's critical to understand the difference between safe assets and dangerous assets.

Safe Assets

These are assets that do not by themselves carry a high degree of lawsuit risk. For example, investment securities like stocks, bonds or mutual funds are unlikely assets for putting you at risk for a lawsuit.

Dangerous Assets

These assets carry an inherent and substantial liability risk. They are generally active, business-type assets, such as rental property or motor vehicles. Both are dangerous because they could invite a lawsuit. Many people either remove dangerous assets from their FLP and transfer them into LLCs or corporations. This is because, if a dangerous asset becomes a lawsuit target, all of the assets in your FLP are vulnerable to a lawsuit judgment.

 

 

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