Family foundation - a response to the real needs of entrepreneurs

Many entrepreneurs – especially family business owners – have struggled for years with questions like: What happens to my business when I retire? Will my children want to and be able to run it? How can I secure my assets and avoid family disputes?

A family foundation is the answer to these challenges. Professionally designed, it can become a stable pillar of multi-generational succession, a tool for protecting assets and a source of security for loved ones.

What is a family foundation and what is it used for?

A family foundation enables long-term wealth management and succession planning in an orderly manner, without the need to divide the business between heirs. It enables the separation of ownership from management, and this – in the case of family businesses – can be the key to survival across generations.

In short, a family foundation is a legal person to whom the founder transfers assets (e.g. shares in companies, real estate, securities) and then determines to whom and on what terms these assets are to be used. This can be the family, but also specific people from outside it - it all depends on the will of the founder.

Family foundation in practice – what are the benefits?

A foundation is a real tool that solves specific problems that many family business owners face. It can effectively protect life's work, organize property matters and prepare the company to function for generations to come - without the risk of conflicts, divisions and sudden plot twists. A well-planned family foundation can be a guarantee of continuity, stability and harmony - both in the family and in business.

The most important advantages of family foundations include:

• Peace in succession – planning without chaos

  The most common motive for establishing a family foundation is the desire to transfer the company to the next generations in an orderly manner. A foundation allows for a clear definition of who and on what terms will use the assets or influence the business activity. This allows for avoiding inheritance disputes, accidental takeover of the company by unprepared family members or the need to sell it.

• Protection of private and business assets

  Contributing assets to a foundation protects them from division (e.g. through inheritance) and from the risks that may be posed by the private lives of family members, such as divorce or unexpected claims. The assets remain under the control of the foundation and do not directly form part of the beneficiaries' assets, which provides a sense of security.

• Benefits for loved ones – flexibility and control

  The founder can specify in the statute to whom and in what form the foundation is to pay the funds – these can be regular benefits, scholarships, covering the costs of education, health care or life support. This is great flexibility, which allows you to take care of your loved ones without directly transferring ownership to them.

• Possibility of continuing to manage the company

  Within a foundation, the ownership structure of the company can be maintained – for example, by contributing shares or stocks – without the need for many people to inherit them. This allows the business to continue without the risk of “fragmenting” the owner and destabilizing management. At the same time, the founder can remain active and have an influence on key decisions.

• Favourable tax environment

  One of the elements that distinguishes a family foundation from other forms of property management is its specific – beneficial and predictable – tax regulations. The foundation has legal personality and conducts business activities only to a limited extent, and its main purpose is to manage the assets transferred to it and pay benefits to beneficiaries. Income generated from business activities specified in the Family Foundation Act – including, among others, participation in companies, lease, tenancy or trading in securities – is exempt from income tax until the foundation pays benefits or is dissolved. The payment of benefits is taxed at the family foundation level at a rate of 15%. On the other hand, the founder and members of his immediate family (e.g. spouse, children, grandchildren, parents) are exempt from personal income tax on benefits received from the foundation.

The most important advantages of family foundations include:

Although a family foundation is an excellent tool for securing assets and organizing succession, its effective establishment and management requires good preparation. The most common challenges that may arise both at the stage of establishing a foundation and in the daily functioning of existing structures include:

• Organizational problems – election of the management board and supervisory board

  Incorrect selection of foundation board members, unclear competences or lack of experience can result in difficulties in decision-making, lack of efficient communication or unnecessary tensions between stakeholders. It is crucial for the founder to consider the composition of the management board and any supervisory board from the outset – as well as any control mechanisms and “safety nets”.

• Ambiguities in tax law

  Although a family foundation operates in a predictable and friendly tax environment, in practice there are still doubts about interpretation – especially in the classification of the foundation’s income, the method of taxation of certain benefits or reporting obligations. Changing interpretations of tax authorities, the lack of established practice and the complexity of some cases (e.g. international activity, foreign investments) mean that founders and beneficiaries often need advisory support.

• Formal, legal and accounting obligations

  A family foundation – as a legal person – must meet specific obligations: maintain full accounting, prepare financial statements, report to appropriate registers or record payment of benefits. Lack of knowledge of procedures or formal errors can result in negative consequences, which is why ongoing support from specialists is so important – both at the stage of establishing the foundation and its daily functioning.

• The Foundation is operating, but not as it should – time to revise the statute

In practice, it happens that a foundation has been established, but its functioning does not meet the expectations of the founder or beneficiaries. Often, the reason is the provisions of the statute, which turn out to be too general or not adapted to the realities. It is worth considering a revision of the document - so that the foundation can operate efficiently and in accordance with the original intention.

Family foundation – how can we help?

A family foundation is more than just a legal tool – it is a long-term strategy for protecting assets, building family order and managing the future. Well-designed, it provides a real sense of security and order – both to the founder and to future generations.

However, for a foundation to truly fulfil its role, it must be well-planned, professionally prepared and efficiently run. Both when establishing it and during its operation – it is worth having a team of experts on your side who know the specifics of this institution and are able to translate the founder's needs into specific legal, organizational and tax solutions.

If you are thinking about a family foundation – or you already have one but want to operate more confidently and efficiently – we are here to help. With experience, care and full commitment.

We offer full support at every stage of the foundation's operation:

• Strategic conversation – is a family foundation a good direction? During an individual conversation, we help analyse the financial situation, business and family goals, to jointly assess whether a family foundation is the right solution and how to best plan it.
• Establishing a family foundation – we help you through the entire process of establishing a foundation: from conceptual advice, through developing a tailor-made statute, to preparing a complete set of documents and completing all registration formalities in court and the National Register of Family Foundations.
• Accounting – we provide comprehensive accounting services for family foundations, ensuring transparency, compliance with regulations and timely settlements.
• Tax advisory – we offer tax advisory services that help family foundations maximize the benefits of a favourable tax environment while minimizing tax risk.
• Legal advisory – we provide support in the field of civil and corporate law, including the creation or update of the statute, the organization of foundation bodies and relations with beneficiaries.
• Legal and tax audit of a family foundation – we conduct audits that allow us to assess how the foundation functions in practice, indicate possible weak points and propose improvements.
• Consultations – we offer individual consultations in the organizational, legal and tax areas, tailored to the needs of a specific foundation and family situation.
• Compliance of family foundations – we help foundations operate in accordance with applicable regulations, supporting them in fulfilling reporting and formal obligations.

Our experience and know-how allow us not only to efficiently establish foundations, but also to run them effectively – so that they achieve their goals, providing a real sense of order and security.