Direct Participation Programs - General Characteristics
Chapters in this video
- 0:00 Why a passive investor accepts zero control
- 1:09 Flow-through taxation versus double taxation
- 1:53 Three legal structures: LP, LLC, S corporation
- 2:24 General partner's unlimited liability and management control
- 3:43 Limited partner's liability shield and non-compete freedom
- 4:55 Certificate versus partnership agreement
- 5:15 Actions that destroy limited liability protection
- 5:39 At-risk amount and the recourse note calculation
- 6:25 Voting rights, inspection rights, and suing for breach
- 6:58 Partnership tax filing: Form 1065 and Schedule K-1
- 7:02 Rapid-fire exam recap
What this video covers
- The definition of a Direct Participation Program (DPP) and how flow-through taxation differs from double taxation in a regular corporation
- The three legal structures a DPP can use: limited partnership (LP), limited liability company (LLC), and S corporation, including the 100-shareholder limit for S corps
- The general partner's unlimited personal liability, fiduciary duty, non-compete restriction, and responsibility for filing Form 1065
- The limited partner's passive role, liability cap at their at-risk amount, and voting rights on fundamental matters only
- The exact actions that cause a limited partner to lose liability protection: participating in management, binding the partnership, or acting as its agent
- How to calculate at-risk amount when a limited partner signs a recourse note, adding cash contribution plus personally liable debt
- Why the partnership itself pays no federal income tax and how Schedule K-1 allocates income or loss to each partner's personal return
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