A Family Limited Partnership (FLP) is a structure designed to allow the patriarch of the FLP to have ultimate control over the investment of assets by the general partner. The structure works by having the patriarch (usually a parent) as the trustee of the trust which owns all the shares in a limited company. The limited company acts as the general partner of the FLP and has ultimate control of the management of the FLP. The patriarch therefore has part control over the investments of the FLP as they have the right to change the directors of the limited company.
There are no restrictions on the property that can be placed in the FLP but the most common types are real estate, market securities and family businesses. The Limited Partnership Agreement outlines the rights of the limited partners
(usually the children) to the income arising from the FLP.
FLP assets are protected by the FLP Agreement so the time and amount of money going to the limited partners may be controlled and restricted.
Benefits
- The modern framework of the Jersey Limited Partnerships Law is more favorable and flexible than the English Limited Partnerships Law.
- The Jersey law allows for some management roles to be taken on by the limited partners.
- Limited partners do not have to disclose their identity on the public register.
- A Jersey FLP does not have a separate legal personality.
- In the case of insolvency, a limited partner making a loan to the FLP ranks equally to other creditors whereas in a UK FLP the limited partner ranks behind other creditors.
- There is no liability for a limited partner to repay capital distributions unless the partnership is insolvent at the time of distribution. In the UK the limited partner will remain liable.