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Using Family Limited Partnerships as a Personal Liability Protector

The LLC is ideal because its members can freely involve themselves in company affairs without jeopardizing their personal immunity. The limited partnership protects partners against the debts of the partnership—but only if the limited partners do not actively participate in the management of the partnership. That being said, limited partners can easily overstep their boundaries and accidentally incur liability for partnership debts, making it critical for all partners to understand prohibited activities and honor the partnership agreement to the letter of the law.

As previously discussed, general partners are liable for all debts of a partnership, including all tort and contract claims. Because of this, individuals should never become general partners when the partnership has liability-producing assets or activities. Instead, they should form a corporation or limited liability company (that has minimal assets) to serve as the general partner.


The best defense is a good offense.