Advantages of a family company
The purpose of a family company is to hold family property, especially real estate, with a long term horizon within the family unit. Such a family company (e. g. a real estate family company) is usually structured as a partnership, especially as a limited partnership („KG“) or a „GmbH & Co KG“.
In such a case there is no real estate taxation for transferring the real estate into the company. Moreover, the taxable income of the real estate will be allocated directly to the taxable income of the limited partners of the family partnership. If contrary to expectation the family shareholders do not want be bound anymore within a family unit, the shares or the real estate can be transferred in general tax free after the expiry of a period of ten years of holding the real estate to a new shareholder or buyer. The annual dead line does not apply to assets other than real estate, e. g. shares held by the family company in a custody account. In such a case every sale of the shares will taxed on the realized profit or loss.
The shareholder agreement is the essential part of the family partnership. Saying that, the contract requires a very careful shaping. Every ruling of the agreement should be discussed intensively by the shareholders involved to reach an unanimous consent if possible. This refers to a range of issues and includes not only but especially the ruling of withdrawal of profit by the partners, succession planning as well as financial compensation in case of leaving or even exclusion from the family partnership.
Also a very important aspect of a family partnership is that there is no need for a notarial certification with regard to the shareholder agreement respectively an amendment of the agreement. as well as the transfer of shares of the limited family partnerships to other or new partners. This is even the case where reals estate is hold by the family partnership. Therefore, an essential cost factor for the company structure can be excluded.
The family partnership is a very good instrument to promote the family ties. However, the individual aspects of every family member have to be considered. This includes primarily age, family situation and profession.
Dr. Michael Knittel
LAWYER CERTIFIED SPECIALIST
TAX ADVISOR CERTIFIED PUBLIC ACCOUNTANT
Maximilianstraße 22, D-67346 Speyer
Tel. (06232) 679 52 55 Fax (06232) 679 52 45