Succession planning for family businesses
Family foundations – an instrument for effective succession planning
Succession planning is a fundamental aspect of strategic business management often overlooked by entrepreneurs. Implementing generational change is one of the most significant challenges for family businesses. This process requires not only determining the future ownership structure and management composition, but also selecting a succession model, preparing properly for the transition, and the actual handing over of the business to the designated individuals. In Poland, a family foundation serves as an effective tool for entrepreneurs looking to organize the “changing of the guard” in their businesses.
Although the family foundation is a relatively new institution under Polish law, similar concepts have been integral to the success of many family businesses in other countries for decades. The main purpose of a family foundation is capital accumulation and the ability to continue the inheritance of assets within the family business. It provides security for the assets to remain in the family and maintain the continuity of the business without having to dismember the capital through property divisions.
A family foundation is a legal entity established for the purpose of accumulating property, managing it in the interests of beneficiaries, and fulfilling benefits to beneficiaries, established under the Law of January 26, 2023 on family foundations.
The beneficiaries of a family foundation can include relatives of the founder or other individuals designated by the founder, or non-governmental organizations engaged in public benefit activities.
Key advantages of establishing a family foundation are:
Asset security: The assets contributed by the founder to establish the initial fund become the property of the family foundation, not the individual beneficiaries. Beneficiaries of the family foundation do not have a direct share in its property, but receive certain benefits defined by the founder’s will in the provisions of the charter. This structure protects the assets from the risk of fragmentation or claims by third parties.
Implementation of the founder’s vision: A family foundation operates under the goals and values established by the founder in accordance with the statute. The Family Foundation Law allows significant flexibility in formulating the provisions of the charter, enabling the founder to fully express their intentions and preferences.
Securing financial needs: A family foundation manages its assets to ensure stability and sufficient financial support for family members, aligned with established goals and an investment strategy. The disposition of the family foundation’s assets should be focused on meeting the needs of the beneficiaries.
Accumulation of family assets: By contributing key assets related to the operation of the family business, including, for example, shares in companies or real estate, to the family foundation, it becomes a central instrument for asset management. This structure can facilitate business, social, or charitable activities.
Professional support in the succession planning process
We offer comprehensive assistance and support at every step of succession planning and family wealth accumulation through a family foundation. Our services include:
Professional consultation and advisory services
Developing of the charter of a family foundation
Registration of a family foundation
Prior to initiating the registration process, a family foundation is preceded by an in-depth analysis of the tax implications of the activities performed. By choosing our succession planning services, you can be assured that your business will be solidly secured for future endeavours. Our team of experienced specialists will help you create a comprehensive succession plan that considers all relevant factors, ensuring business continuity even in the event of personnel changes or crises.
SWGK also offers to prepare professional appraisals of assets contributed to cover the founding fund of a family foundation.
Once your family foundation is operational, we at SWGK will remain ready to provide further support with ongoing legal advice, tax advice, or accounting services.