Family Limited Partnership or FLP vs. Wyoming Limited Liability Company

Family Limited Partnership or FLP is a limited partnership created by statute which is owned by people related by blood or marriage. A minimum of two people or business entities can form a limited liability as partners.

Limited liability companies are statutorily created businesses which can be governed by the members or a manager. This implies that LLCs can operate as partnerships or corporations. LLCs can also be owned by a single or several members, and they also enjoy pass-through taxation.

Wyoming LLCs can be dissolved if they refuse to file an annual statement. This can also apply to most state FLPs.

Disadvantages of Family Limited Partnership

Family limited Partnerships don't provide adequate legal asset protection as they lack privacy.

If you have a self-settled offshore trust as a limited partner and you are a general partner in an FLP, the FLP can't protect your assets because the law's position is that you don't have two partners. You will also be personally liable to the FLP's debts and obligations.

Advantages of Wyoming LLC

Wyoming LLC benefits include:

  • Privacy: Assets held in a Wyoming LLC enjoy a high level of anonymity because the state does not keep electronic records of the members or managers of an LLC. However, this level of privacy is not available to family limited liabilities.
  • Excellent Asset Protection: Under Wyoming laws, a charging order is the only remedy available for creditors of LLC owners. A charging order is a court-issued directive instructing a business to forward all incomes that should go to the LLC owner to the judgment holder. This order makes collecting a judgment extremely difficult for a creditor as it can't force the LLC owner to give up their ownership interest in the company. Also, the creditor can only get direct distributions from the company after the approval of a judgment holder, allowing the LLC more negotiating power in resolving their differences with creditors. Single member LLCs also benefit from this protection.
  • Continuance: Business owners require a certificate of continuance when the company relocates to another state. Wyoming creates a legal fiction when businesses move their operations to the state. The company will be considered to have been operating in Wyoming all along. A company is allowed to keep its original incorporation date after becoming a Wyoming LLC without losing the benefits that come with continuity and longevity.
  • Valuation Discounts: Non-control interests of LLCs operating in Wyoming can be discounted when offered as a gift for estate planning purposes.
  • Management: Wyoming LLCs have a flexible management structure as the members of the LLC, or a selected member can manage the company.
  • Pass-through Entity: Wyoming LLCs are taxed as pass-through entities, like family limited partnerships.
  • Corporate Veil: This separates the assets and liabilities of the LLC owners and that of the company. It serves to protect LLC owners from financial risk through their company. However, the corporate veil is not available to a Wyoming LLC which is found to be fraudulent. An LLC will continue to be protected by the corporate veil so long as it does not involve itself in fraud and performs its corporate responsibilities.
  • State Taxes: Wyoming does not collect state income tax from individuals and businesses and does not plan to do so in the future. The reason for this is that the state has had a multiple year budget surplus. Creating an LLC in Wyoming is cheaper than other states, and other ongoing costs payable to the state are also considerably lower.
  • Does Not Require Citizenship: Citizenship is not a requirement for establishing a Wyoming LLC. You can live anywhere in the world and operate an LLC in Wyoming. Business owners can use several affordable Wyoming mail forwarding services to provide the necessary presence to operate in the state.
  • Perpetual Existence: A Wyoming LLC is a separate legal entity from its owners. It can exist on its own perpetually. Wyoming LLCs can operate for long periods spanning several generations. The ownership interest in a Wyoming LLC can be gifted or sold, and the company can operate until its dissolution.

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