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What Is a Family Limited Partnership (FLP)?

The structure families use to hold assets together, transfer wealth efficiently, and keep control across generations.

Last updated 9 August 2026 · 2 min read

A family limited partnership (FLP) is a partnership in which family members hold interests: the older generation typically holds a small general-partner stake with control, while transferring larger limited-partner interests to children. It lets a family pool assets, transfer wealth efficiently (often at a valuation discount), keep control, and protect assets, all in one structure.

The family limited partnership is one of the classic workhorses of wealth transfer, especially in the United States. It solves several problems families face at once: how to hold assets together, move them to the next generation efficiently, and not lose control in the process.

What it is

A family limited partnership (FLP) is a limited partnership whose partners are members of one family. It uses the standard partnership split of roles:

  • The general partners (usually the parents or founding generation) hold a small interest but full control: they manage the assets and make the decisions.
  • The limited partners (usually the children and grandchildren) hold larger economic interests but no control: they share in the value and income but cannot direct the partnership.

Assets, an investment portfolio, real estate, a family business, are placed into the FLP, and interests in it are then transferred down the generations over time.

What it achieves

The FLP is popular because it does four jobs in one structure:

  • Pooling and unified management: family assets are held and managed together, professionally and coherently, rather than fragmented.
  • Efficient wealth transfer: parents can gift or sell limited-partner interests to heirs gradually, moving wealth out of their taxable estate.
  • Retained control: crucially, the senior generation keeps the general-partner role and control, even after transferring most of the economic value. Parents can pass on the wealth without yet passing on the power.
  • Asset protection: limited-partner interests are harder for creditors to seize than assets held outright, adding a layer of protection.

The valuation discount

The FLP's most powerful, and most scrutinised, feature is the valuation discount. Because a limited-partner interest has no control and cannot be freely sold, it is worth less than the pro-rata value of the underlying assets. This lack-of-control and lack-of-marketability discount lets parents transfer interests at a reduced taxable value, moving more wealth to heirs for less gift or estate tax. Tax authorities examine these discounts closely, so the partnership must have a genuine business purpose, be properly run, and be well documented; an FLP created purely to game the tax value can be challenged and unwound.

Where it fits

The FLP is one option among several for holding and transferring family wealth, alongside holding companies and trusts, and it is often used in combination with them. For the broader decision, see What Is the Best Structure to Hold Family Wealth? and What Is Estate Planning?

Frequently asked questions

What is a family limited partnership?
A family limited partnership (FLP) is a limited partnership whose partners are family members. Typically parents hold the general-partner interest, which carries control, while gifting or selling limited-partner interests to children and grandchildren. It is used to hold and manage family assets together and to transfer wealth to the next generation in a controlled, tax-efficient way.
Why do families use an FLP?
For four things at once: pooling assets under unified management, transferring wealth to heirs efficiently (limited-partner interests can often be gifted at a valuation discount for lack of control and marketability), retaining control (the senior generation keeps the general-partner role), and asset protection (limited-partner interests are harder for creditors to reach).
What is the valuation discount in an FLP?
Because a limited-partner interest carries no control and cannot be freely sold, it is worth less than the underlying assets' pro-rata value. This lack-of-control and lack-of-marketability discount lets parents transfer interests to heirs at a reduced taxable value, moving more wealth for less gift or estate tax. Tax authorities scrutinise these discounts, so the structure must be genuine and well-documented.

This guide is educational and general in nature. It does not constitute investment, legal, tax or financial advice.