What is a Limited Liability Company?
A limited liability company is an entity that provides protection from creditors like a corporation while having the informality and pass-through tax status of a partnership. The two essential documents for a California LLC are the Articles of Formation, which is a form you file with the Secretary of State, and the Operating Agreement, which is essentially a custom partnership agreement that is not a public document.
You need to create a California LLC, or register your out-of-state LLC if you formed it in Delaware or another jurisdiction, if the entity conducts intrastate business in California.
An LLC is especially appropriate for holding real estate or companies with relatively few owners.
What is a Family Limited Partnership?
A family limited partnership, and the similar family limited liability company, are businesses that are owned by members of a family at the current time, and that the owners intend to keep in the family, down to at least the next generation.
The significance of the “family” designation is that the partnership or operating agreement will limit who may be owners. In addition, there can be estate tax benefits in giving fractional ownership interests in a legitimate business entity to the next generation as opposed to giving the assets themselves.