Five points to consider for a future-proof family business
Every company faces key moments that require a careful balancing act between head and heart. Taking the following points into account will help you to put your assets to good use and preserve unity within your family.
1. Set up a family forum and draw up a family charter
Family businesses can only remain successful if they manage their business and family professionally. Family ownership, blood ties and family dynamics can be a source of strength, but also conflict. That is why we recommend creating a consultation framework before you start thinking about succession.
This can take concrete form by setting up a family forum, drawing up a family charter or even by appointing external, neutral advisers. This can take the form of a family forum, a family charter or even the appointment of external, neutral advisers. If a meeting and consultation framework is already in place, you can use it as a solid foundation for a streamlined handover when time is right.
2. Consider a control structure
As the head of the family, you may favour a control structure that allows you to stay in control a little while longer. This may be appropriate if some of your children are very active in the business and others are less involved, for instance.
Particularly in family businesses, a partnership can be a flexible and discreet way of structuring the transition. This vehicle offers a great deal of statutory freedom and allows the management of the family business to be transferred in a gradual and controlled way, with the older generation retaining an advisory role.
3. Set up a liquidation reserve, even if you are not yet thinking about stopping
The creation of a liquidation reserve makes it possible to draw funds from the company in the medium to long term in a tax-efficient way.
Each year, you can use your profit after tax to set aside a liquidation reserve. This is subject to an additional 10% corporation tax, but when the company is eventually dissolved, it can distribute this reserve to the shareholder(s) completely tax-free. If the company distributes the reserve sooner, the total tax burden is still only 15% (including the 10% already withheld), provided that a statutory waiting period is observed.
The company can invest any (surplus) cash it retains for this purpose. The potential returns from such investments may, in turn, also benefit from a favourable regime. Such tax-efficient investments may ultimately result in an even higher return after taxes.
Please note that the liquidation reserve that has been set aside should certainly also be taken into account during a business transition (through a gift, for example). Who will the reserve go to: the transferor or the transferee? If you are planning to sell the company, it may actually be advisable not to set aside a liquidation reserve.
4. Consider a charity plan
After the business transition, you can spend some of your assets on philanthropy by drawing up a charity plan. Such a plan helps you to proactively establish what charities or projects suit you.
Philanthropy can be seen as a next step or new beginning that allows you to shape your vision for the future and make a positive contribution to society. There are various legal options – from a one-off gift to the establishment of the company's own foundation – each with their own tax implications.
You can set this up even before the business transition. We see some companies engaging in philanthropy themselves, which often also has a positive impact on the company itself.
5. Let us guide you through the journey
The complexity of a family business calls for expert guidance. Engaging advisers specialising in the financial, legal and emotional aspects of a family business can be crucial. Such guidance enables you to make informed decisions, minimise the risks and safeguard the continuity of both your business and family harmony.
