There are a number of interesting possibilities. For example, the limited partners can allocate their ownership interests or profit distributions as they elect. This is important for protection. For instance, you can contribute your personal assets to the partnership for a proportionately smaller partnership share and the remaining limited partnership interest can be owned by other family members. However, that's a taxable gift if the other family members are not your spouse. Again, it's important that your accountant review your limited partnership's proposed structure to avoid tax liability and also to determine that the LP is favorable from a tax standpoint.
Families adopt rather typical limited partnership structures. For example, mom and dad may form the LP and contribute various income-producing investments in exchange for their partnership interests. As the general partners, they may each receive a two percent partnership interest. As the general partners, they would equally control the partnership, much as they jointly controlled the contributed assets. As the limited partners, mom and dad would own the remaining limited partnership interest (general and limited partners can be the same parties). Under this arrangement, mom and dad would now exclusively and equally own and control the partnership and its assets. You see, there's no real change from when their assets were titled to their individual or joint names – only now their assets are protected.
There are other structural possibilities. If dad has creditors, mom may become the sole general partner. Or mom and dad may form a corporation or LLC to be the general partner. This is a particularly good arrangement if the partnership can incur liabilities for which the general partners would have liability. Using a corporation or LLC as the general partner also adds privacy to those personally involved in the entity.
You can easily modify limited partnership structures. For instance, one spouse may eventually own a greater partnership interest, or parents may gradually gift their limited partnership interests to their children, to their living trusts, or to other entities. The limited partnership's flexibility works especially well for estate planning and lifetime gifting.
