When to use a Limited Partnership | Mark J Kohler | Tax & Legal Tip

Hi Mark Kohler Here with another tax and Legal Tip Let's talk about the limited partnership

Now these aren't used too often with the advent of The llC Limited liability Company They tend to be

Used Much Less Because They have a Unique feature When it comes to tax planning and asset Protection and

Llc'S have tried to fit that mold for the most Part and so Once in a While you'll find a reason to use a Limited

Partnership but i want to give you two biggie's Now Number one

Let'S compare the llc Mm in partnership as It May Make more sense to Explain It in that Fashion

So here you have your llc and It Holds a Rental property and if There's any problem you're protected from a lawsuit Right

Well With The Limited partnership you Get the same Protection with the limited partnership

But Let's Say Someone Wants to sue you and they come after you personally

Can They get into your llc and take Away your property

in about 25 states for 30 states they can This is called a Charging order Protection issue

I've Got Other videos and articles Written on this but Only about 15 states do we see an llc

Really Giving You the powerful Protection from the outside as Well as the inside well this is where limited

partnerships give a Lot more Protection from the outside

So if someone comes At You personally They can't get into the limited partnership to take Away your Rental from

Now as to the structure of a Limited partnership They're Very different Than a Corporation or llC as Well in a Limited partnership

you Have Limited partners and a General partner so


Here's Your Limited Partners Down Here Which can be you but then you want a General partner Entity You don't want a person as the

General Partner Because They're Liable for Everything in the Limited partnership so a pair you usually have a Corporation?

Typically an S corp This Serves is that One Percent

General Partner For The Limited partnership and It Runs the show you get Excellent asset Protection

Everything's Great Right so we think the limited partnership is the best Way to go however hold on

Now the problem with the limited partnership are the deductions that Flow Through Losses that will Generally come with Rental Property or

Any Sort of real estate Holding Long Term with depreciation so That's where the LP causes problems in an llc

Any Losses Flow Through Down to you personally and then You've Got Your active versus real estate professional

classification more Videos more articles but but in an lp Any

Losses that come through

Get Sucked Into a Carry Forward Bucket and That Bucket Just Grows and You can't use them until you sell anything in the limited partnership

so from a Tax planning standpoint Limited partnerships can Be Terrible

Now when do you use a limited partnership When you don't

Have property you're depreciating Like a Rental May be a second home a Beach house a Cabin or a Ranch or farm?

The Limit of partnerships can Be Fantastic for That Better Than an llc

So again This is Why getting the advice of a professional

to understands the nuances and differences Between an S corp And llc of C corp and an LP

Can Help You Design The right structure for Your Situation

Be Careful Going online and Click Click Click I'm gonna get an llC Because Everybody Else Does It can oftentimes be the wrong decision

Anyway hope That Helps and Keep Living The American Dream

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