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There is the Limited Partnership or LP valuation factor since there is no liquidity until the Limited Partnership is sold or liquidated. Since there is no liquidity, and therefore no readily available market value, often circumstances will require a Limited Partnership valuation or appraisal. This is required when an IRA needs an IRA Valuation for distribution to personal ownership, Roth IRA conversion, and Required Minimum Distribution (RMD) computation at age 70 1/2. A Limited Liability Partnership valuation is often required when computing a pension, profit sharing, or 401k plan participant distribution. The LP appraisal is often required for Estate and Divorce Valuation purposes.
A Limited Partnership, LP, is a business organization, a partnership, with one or more members, who manage the business and but do not individually assume legal debts, and obligations, and as individual investment unit holders receive the cash flow or capital gains from their portion of the investment. One or more Partnership members assume the management responsibilities, as the General Partner(s) of the Limited Partnership or LP.
Sheltering the individual Limited Liability members from legal liability has always been a major attraction for investors. The General Partner, not the Limited Partner, assumes legally responsibility for legal and financial obligations. Except for a large publicly registered Limited Partnership, significant amounts of money can be raised without any significant registration as a security offering. This makes a Limited Partnership a very cost effective vehicle for raising investment capital.
In a Limited Partnership, the Limited Partners most often have a fractional minority interest in the Limited Partnership. The fractional minority interest of a Limited Partnership valuation should follow the guidelines set forth in IRS Revenue Ruling 59-60, and sometimes the financial accounting standard, FAS 157.
The IRS, Dept. of Labor, and most auditors will only accept Valuations computed, and documented with supporting exhibits, from an independent expert. Valuations from the investor, the investment management, and the investment management's accounting firm, are not acceptable to the above agencies.