Company Succession: Generation Change in Family Businesses

How to ensure the continuity

Germany, the country of medium-sized companies, owner-managed family businesses and difficult company succession. There is hardly a country that boasts as much about the strength of its middle class as Germany. At the same time, however, despite all the pride in the middle class, no other “social class” is asked to pay as much. When it comes to the subject of money, it is a well-known fact that friendship ends, and even more so when it comes to the subject of taxes.

So what should entrepreneurs do to ensure the continuity of their family business when succession is imminent?

There are several aspects that are important in a business succession. Besides the clarification of the successor and a possible financial compensation for the family members leaving empty-handed, the core legal and tax aspects have to be discussed before the actual succession. In this context, business aspects should also be taken into account, especially against the background of a possible tax burden.

The tax aspects of business succession

If a succession arrangement has been made in which property is transferred, then there are several taxes that may apply to both the current business owner and the future successor. As a rule, the following taxes are levied in the context of a business transfer: Income tax, real estate transfer tax, gift and/or inheritance tax.

Tax burdens, especially on the part of the company or business, can have serious consequences for the continued existence and profitability of the company. Comprehensive advice in the run-up to a company succession is indispensable in order to avoid a break-up or sale of the family business.

The declared aim must be to keep any tax burden as low as possible.

The legal aspects of business succession

In the run-up to a company succession that envisages the company remaining in the family, it is also important to thoroughly examine the legal aspects of the succession arrangement. In particular, the company law, the chosen legal form of the company as well as the already concluded shareholder agreements have to be reviewed carefully in order to ensure a smooth company succession.

Company succession: How we support you

  • Development and design of a succession concept
  • Advice on asset protection in the event of early relinquishment
  • Advice on foundations (family foundations & double foundations )
  • Tax law advice in the context of business succession
  • Advice on trusteeship
  • Advice on the subject of compensation obligations
  • Correction of tax returns
  • Drafting of managing director contracts
  • Precautionary advice

Helpful articles on the topic of business succession:

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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