Any type of business or investment asset can belong to an FLP. Assets related to an operating business, such as a store or ranch, work particularly well. But some families set up an FLP solely with investment-type assets. When deciding how to fund the partnership, it's critical to understand the difference between safe assets and dangerous assets.
These are assets that do not by themselves carry a high degree of lawsuit risk. For example, investment securities like stocks, bonds or mutual funds are unlikely assets for putting you at risk for a lawsuit.
These assets carry an inherent and substantial liability risk. They are generally active, business-type assets, such as rental property or motor vehicles. Both are dangerous because they could invite a lawsuit. Many people either remove dangerous assets from their FLP and transfer them into LLCs or corporations. This is because, if a dangerous asset becomes a lawsuit target, all of the assets in your FLP are vulnerable to a lawsuit judgment.
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