Turn the Disadvantages of Limited Partnerships into Benefits
by JJ Childers
This week's Monday Morning Mentor Minute
JJ Childers here continuing our discussion about how to turn the disadvantages of limited partnerships into benefits.
And there is some good news! First, the general partner, the one with full control AND full liability, doesn’t have to be a human, it can be a legal entity. Now which legal entity has its own limited liability AND separate taxation? That’s right, our old friend, the corporation. So if your General Partner is a corporation owned by you, and not a person, you have taken out the disadvantage of full liability for the general partner, AND given yourself and your partners additional tax savings.
So what are the tax benefits of a limited partnership?
Limited partnerships help reduce taxes in two key ways:
Deductions
Income shifting. For example, the corporation (the general partner) can receive a reasonable income for operating the partnership. After all, who doesn’t want to get paid for doing all the work? The corporation is taxable in its’ own income bracket, and the partnership gets a deduction for paying the management fee to the corporation
