A Limited Partnership has one or more
General Partner(s) and one or more Limited Partner(s).
The general partner has all management control and is liable
for all the partnership's activities. The Bifid DesignT
was engineered to resolve the General Partner liability issue
and adds unlimited flexibility to the structure. The
Limited Partner(s) must remain in a passive management role
to limit their liability. The extent of a limited partners
liability is his invested share. A Limited Partnership's Income
and Expenses pass through to all partners on a percentage
of ownership basis and is considered passive income.
The limited partnership is a major component of your "Financial
Fortress". The Limited Partnership structure and it's
legality of business activities are supported
by years of Case Law, is flexible and versatile,
and is almost impenetrable because of the Charging Order
benefit. Below is a summary of the advantages and disadvantages.
· Well Established
Through Years of Case Law: - Private Property
of stockholders, directors and officers
· A+++ Asset Protection: - Through the use of a limited partnership, assets can be
placed out of the reach of creditors and would be plaintiffs.
Their only course of action is the use of a charging
order, described below.
· Charging Order:
- is the Limited Partnership's force field and provides
an invisible wall of protection. Years of case law has established
a mandate that Limited partnerships will not be forced to
liquidate assets of the partnership, nor can the individual
partners be forced to turn over their partnership units
to the creditor. Instead the courts issue a Charging
Order, which relays to the creditor any income
and tax obligations of those partnership units, whether
the income is distributed or not. A wise General Partner
under these condition, will decide not to distribute the
income, yet the charging order holder is still liable for
the taxes owed on the actual percentage of income of that
partner. A real ticking Bomb.
· Income Shifting
resulting in Tax Reduction: - By transferring
your ownership percentages of the limited partnership, to
your children or other benefactors, the income from the
partnership is then taxed at lower income tax brackets.
· Partnership
income is considered passive : - No FICA, SS,
or Medicare, nor self-employment taxes are due on this money.
· Estate Planning
- An individual taxpayer can gift $11,000 a year
(as of 2003) to as many individuals as they wish, and the
money is tax free to the recipients. By gifting partnership
units to your children every year, your estate can
be reduced drastically over time. The great part about
Limited Partnerships, is the General Partner is always in
Control, so even though ownership has been transferred,
you still control the assets until you die.
· Discounting
upon Death - The nature of most Limited Partnership
agreements make the units of an existing partnership less
than marketable to outsiders. Thus upon a partners death,
the units are normally discounted when the estate is calculated.
· Business
Deductions - Normal expenses can be structured
to be business expenses and paid for with pre-tax rather
than after tax dollars. A limited partnership's available
fringe benefits are limited compared to a Corporation, but
if you implement the BIFID DesignT you have the best of
both worlds.
· Limited
Partnership Privacy - When Limited Partnerships
are registered with the state, only the General Partners
are listed with the state.
· Multi-State
Operation - Limited partners registered in one
state can operate in all other states that we know of
without registering as a foreign entitity operating in that
state.
Disadvantages
· Potential Loss of Tax Benefits
on Personal Residence if transferred to a Limited Partnership.
