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Forever Living Products International, Inc. (FLPI) is an American privately heldmulti-level marketing (MLM) company based in Scottsdale, Arizona, which manufactures and markets aloe vera-based drinks and bee-derived cosmetics, dietary supplements, and personal care products.^[1] The company was founded in 1978 by CEO Rex Maughan. After acquiring the company Aloe Vera of America by the 1990s,^[2] the company reported a network of 9.3 million distributors and revenue of $1.7 billion in 2010, and in 2006 they reported having 4,100 employees.^[1][3]

History[edit]

Forever Living was founded in 1978 in Tempe, Arizona^[4] by Carl Jensen and Rex Maughan.^[1] By the 1990s, Maughan had purchased the Texas company Aloe Vera of America, with Aloe Vera of America selling its products to Forever Living for distribution.^[2] Some journalists have likened the multi-level marketing business model of Forever Living's distribution system to that of a pyramid scheme.^[5]

In 1983, the company was named No. 6 on Inc. Magazine's annual Inc. 500 list of the fastest-growing private companies in the United States.^[6]

According to Arthur Andersen's Top 100, as of 1993, Forever Living Products International was Arizona's second-largest private company.^[7] As of August 1995, Forbes reported the company's product line included 'deodorants, toothpaste, laundry detergent and three dozen other products, nearly all of which contain extract of aloe.'^[8]

Forever Living reported unaudited annual revenue exceeding $1.15 billion in 2005^[1] and ended the year with around 150,000 distributors^[9] and 55 employees.^[10] The following year, Forever Living was listed at No. 340 on the Forbes 400 list, which ranks the largest private companies in the United States. At the time, the company was described as having 4,100 employees and sold its product in 100 countries.^[1]

In 2010, the company reported unaudited revenue of $1.7 billion and a network of 9.3 million distributors.^[3] The company was active in over 165 countries as of 2018.^[4] In February 2015, the company announced they had appointed a new management team to 'oversee the affairs of the company in Nigeria.'^[11]

Legal[edit]

In 1996, upon suggestion of the American authorities, the Internal Revenue Service (IRS) and the National Tax Agency of Japan (NTA) initiated a joint audit of Rex and Ruth Maughan and related entities Aloe Vera of America (AVA), Selective Art Inc., FLP International, and FLP Japan for the period of 1991 to 1995.^[12] In 1997, the NTA imposed a penalty tax of 3.5 billion yen on Forever Living's Japan division for concealing income of 7.7 billion yen over the five-year period.^[13] Later that year, AVA, Rex and Ruth Maughan, Maughan Holdings, Gene Yamagata, and Yamagata Holdings^[14] sued the IRS for unauthorized disclosure of tax return information.^[13] In the midst of the lawsuit, The IRS asked the NTA to drop its decision against Forever Living, and in 2002, the agency “grudgingly complied with the IRS's request”, announcing that the penalty tax had been effectively withdrawn.^[13] In February 2015, a USA district court ruled that the IRS knowingly provided some false information about AVA to the NTA, in violation of the United States' tax treaty with Japan.^[15] and awarded three of the plaintiffs one thousand dollars each in statutory damages.^[15]

In 2004 claims made about Forever Living products were found to be in violation of several laws in Hungary related to advertising, registration of nutritional products, and the use of cosmetics as medicinal agents. As a result, the company was fined 60 million HUF (approximately US$280,000).^[16]

In 2007, author Richard Bach made claims against the company for copyright infringement and trademark infringement.^[17] The lawsuit stated that for over 20 years Forever Living had used the character, storyline, and copyrighted excerpts from the novel Jonathan Livingston Seagull to promote its marketing plan, and also used the motion picture and novel as its corporate logo.^[18][19] The claim was satisfied through arbitration,^[20] and shortly after, Forever Living changed its company logo^[21] from a seagull to an eagle.^{[citation needed]}

In 2015, Forever Living was criticized by the UK Advertising Standards Authority for making false claims about the health benefits of its products, which were sold as a cure for various diseases ranging from diabetes to Crohn's disease. The company was also warned not to use health professionals in its promotional materials. Subsequently, the UK Medicines And Healthcare Products Regulatory Agency launched an investigation after it was revealed that NHS staff were moonlighting as sales people.^[22][23][24]

Between 2011 and 2016, Forever Living Products and its associated companies have been sued multiple times in the Superior Court of California by Environmental Research Center (ERC), a California non-profit corporation^[25], for violations of Proposition 65 or the Safe Drinking Water and Toxic Exposure Act.^[26][27] The ERC alleged that levels of lead in supplements, makeup, drinks, protein shakes, and bee pollen manufactured by Aloe Vera of America and distributed by Forever Living Products contained lead in quantities requiring warnings to consumers. The products identified in the complaints are no longer available for sale in California and some of the products alleged to contain lead including Garcinia Plus, Forever Lite shakes, and Bee Pollen were part of the Clean 9 kit which was marketed as a 'detox' program.^[28]

See also[edit]

References[edit]

1. ^ ^abcde'The Largest Private Companies: #340 Forever Living Products Intl'. forbes.com. 2006. Retrieved June 29, 2008.
2. ^ ^ab'ALOE VERA OF AMERICA INC v. UNITED STATES'. Case Law. July 30, 2009. Retrieved June 6, 2015.
3. ^ ^abEmmert, J.M. (2011). 'DSN Global 100: The Top Direct Selling Companies in the World'. Direct Selling News. Retrieved June 6, 2015.
4. ^ ^ab'About Forever Living'. www.foreverliving.com. Retrieved January 31, 2015.
5. ^Max de Leon (April 28, 2003). 'A very thin line between multilevel marketing and pyramid schemes'. Retrieved April 21, 2014.
6. ^Richman, Tom (December 1, 1983). 'Going Their Way - Whatever else catapulted them to the peak, it wasn't conformity to the norms of business'. Inc.com. Retrieved May 27, 2015.
7. ^Huston, Jenni (November 12, 1993). 'No. 2 private company is 'best-kept secret' in state. (Forever Living Products International Inc.) ( in state)'. The Business Journal. Trove. Archived from the original on June 20, 2015. Retrieved October 4, 2019.
8. ^Palmeri, Christopher (August 14, 1995). 'The aloe juice man. (Forever Living Products International)'. Forbes. Business: Highbeam. Archived from the original on May 30, 2015. Retrieved May 27, 2015.
9. ^'Forever Living Products hopes to see sales up in H2'. Ziarul Financiar. August 2006. Archived from the original on August 4, 2008. Retrieved June 29, 2008.
10. ^'Forever Living Products hopes to see sales up in H2'. Ziarul Financiar. August 2006. Archived from the original on August 4, 2008.
11. ^Bilbur, Jon (February 20, 2015). 'Forever Living Product Gets New Management Team In Nigeria'. The Tide News Online. Retrieved May 27, 2015.
12. ^Cope, Charles W. (February 2015). 'United States Held Liable for Making False Statements to Foreign Tax Authority'. copetax.com. Retrieved May 27, 2015.
13. ^ ^abc'Tax agency takes back penalty tax on U.S.-affiliate firm'. Kyodo News International, Inc. July 26, 2002. Retrieved May 27, 2015.
14. ^'376 F. 3d 960 - Aloe Vera of America Inc v. United States'. OpenJurist. July 19, 2004. Retrieved May 27, 2015.
15. ^ ^abKroh, Eric (February 11, 2015). 'Ariz. Judge Docks U.S. $3,000 For Disclosing Taxpayer Info'. law360.com. Retrieved May 27, 2015.
16. ^'Hungarian Economic Competition Office fined FLP for 60 million HUF'. Archived from the original on January 10, 2014. Retrieved November 25, 2011.
17. ^Schwabach, Aaron (2011). Fanfiction and Copyright. Ashgate. pp. 39–40. ISBN978-0-7546-7903-5.
18. ^'Richard BACH, et al., Plaintiffs, v. FOREVER LIVING PRODUCTS U.S., INC., et al., Defendants'.
19. ^Law Updates: Richard Bach et al
20. ^'Bach v. Forever Living Products US, Inc., 473 F. Supp. 2d 1110'. February 6, 2007. Retrieved May 27, 2015.
21. ^'Bach v. Forever Living Products U.S., Inc'. Law Updates. July 13, 2007. Retrieved May 27, 2015.
22. ^'ASA Ruling on Forever Living Products (UK) Ltd'. The Advertising Standards Authority Ltd / The Committee of Advertising Practice. September 2, 2015. Retrieved September 27, 2018.
23. ^'Forever Living Warned by ASA'. Insider Media Ltd. September 1, 2015. Retrieved September 27, 2018.
24. ^Harrison-Dunn, Annie (June 14, 2016). 'ASA puts maca claims to bed following Facebook fallout'. Nutra Ingredients. Retrieved September 27, 2018.
25. ^'About Environmental Research Center'. www.erc501c3.org. Retrieved January 23, 2020.
26. ^'ERC v Forever Living 2011'. webapps.sftc.org. Retrieved August 30, 2019.
27. ^'ERC v Forever Living Products 2013'. webapps.sftc.org. Retrieved August 30, 2019.
28. ^Jan 22, the Diet Self Help Team ; Guides 0, 2019 Diet (January 22, 2019). 'Clean 9 Detox Diet: The Complete Review and Beginner's Guide'. Diet Self Help. Retrieved August 30, 2019.

External links[edit]

What Is a Family Limited Partnership (FLP)?

A Family Limited Partnership (FLP) is a type of arrangement in which family members pool money to run a business project. Each family member buys units or shares of the business and can profit in proportion to the number of shares he or she owns, as outlined in the partnership operating agreement.

Key Takeaways

• A family limited partnership (FLP) is a business or holding company owned by two or more family members in which each family member can buy shares in the venture for a potential profit.
• There are two types of partners in an FLP: general partners and limited partners.
• FLPs are commonly set up to preserve generational wealth within a family, allowing for tax-free transfers of assets, real estate, and other wealth.

Understanding the Family Limited Partnership (FLP)

Family Limited Partnerships have two types of partners. General partners usually own the largest share of the business and are responsible for day-to-day management tasks such as overseeing all cash deposits and investment transactions. The general partner may also take a management fee from profits if outlined in the partnership agreement.

Limited partners have no management responsibilities. They instead buy shares of the business in exchange for dividends, interest, and profits the FLP may generate.

FLPs vary depending on the nature of the business. For example, suppose an individual wants to start a luxury apartment venture. He expects the project to cost $1 million, including working capital, and take in about $200,000 in cash each year before interest on mortgage payments and taxes. He calculates that he'll need at least a 50% down payment of $500,000. So, he calls some family members and they all agree to establish an FLP that will issue 5,000 limited partnership shares at $100 each for a total of $500,000. The limited partnership agreement states that units can not be sold for at least six years and the FLP will pay 70% of cash earnings in the form of dividends.

As the general partner, the original individual who made the calls buys 500 shares by contributing $50,000 to the FLP. Family members buy the remaining shares. Now, each family member owns a stake in an FLP starting at $500,000. Next, the general partner might get a first mortgage loan for the rest of the $500,000 to start the $1 million luxury housing project.

The FLP then leases these apartments to tenants and begins taking income from rent. As the mortgage is paid off, profits and dividends are distributed and each family member grows wealthier.

Advantages of Family Limited Partnerships

There are some estate and gift tax advantages of a family limited partnership. Several families establish FLPs to pass wealth down to generations while securing some tax protections. Every year, individuals can gift FLP interests tax-free to other individuals up to the annual gift tax exclusion. Currently, the gift exclusion is $15,000 for individuals and effectively doubled to $30,000 for married couples.

Suppose a couple amassed savings worth $5 million. They have three children and nine grandchildren. The couple decides to transfer the entire amount to the FLP they established. Each year, they gift $30,000 worth of FLP interests to each of their 12 kids or grandkids. This means the couple can transfer $360,000 worth of FLP interests gift-tax free every year (assuming the gift tax exclusion remains the same).

Future Returns Excluded from Estate Taxes

In addition, these assets effectively leave the couple's estates, as far as the IRS is concerned, so any future returns would be excluded from estate taxes. The couple's children and grandchildren would benefit from any interest, dividends, or profits generated from the FLP—thereby preserving wealth for future generations.

As general partners, the couple can set stipulations in the partnership agreement in order to protect these gifts from being squandered or mismanaged. For example, they can set a rule stating the gifted shares can't be transferred or sold until the beneficiaries reach a certain age. If any beneficiaries are minors, the shares can be transferred through a Unified Transfers to Minors Act (UTMA) account.

Because the structure of FLPs and the tax laws that govern them are complex, families should consult qualified accountants and tax professionals before establishing an FLP.