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Setting up a family limited liability company can offer asset protection against creditors but it can also play an important part in estate planning for business owners. They can be used to minimize estate taxes for families that have substantial assets.
A family LLC is typically costly to form and maintain and requires a legal counsel who has experience with setting up family businesses. Of course, while not necessary, it's always a plus if the attorney is also familiar with the type of business the family owns.
While there are several benefits to using an FLP, there are a few disadvantages that must be considered: An FLP must have at least one general partner that will generally have unlimited liability for the partnership's debts and obligations.
Disadvantages of creating an LLC Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office.
The best way to plan for the maintenance and legacy of a family cabin with multiple owners for generations to come is to set up a legal structure such as a trust or limited liability corporation. For many families, sharing and caring for the family retreat can be challenging when multiple, related people are involved.