Changing family businesses: designing sustainable structures

Many family businesses grow over many years – economically, structurally, and in terms of personnel. Real estate is purchased, shareholdings are built up, and new companies are established. The number of shareholders increases, generations change, and roles shift.

By contrast, legal and tax structures often fail to develop at the same pace: articles of association, shareholder agreements, managing director service contracts, rules of procedure, wills, or asset allocations often remain unchanged – and no longer reflect the company’s current reality.

Changing structures – typical developments in family businesses

What used to be a clear operational unit with one or two shareholders often evolved into a holding structure with various subsidiaries, real estate assets, shareholdings, and several family members in active or passive roles.

Typical triggers for structural change are:

• the separation of operational business, real estate ownership, and equity investments
• a generational change – e.g., from active participants to purely economic stakeholders
• the desire for early asset transfer or corporate restructuring
• considerations regarding succession, sale, or the involvement of third parties

In this dynamic, it quickly becomes clear that established structures alone are no longer sufficient. Rather, a re-evaluation is needed – with a view to ownership structures, corporate law regulations, and tax implications.

Tax challenges – when the structure no longer fits the tax scheme

In established family structures, tax issues arise that were not initially a priority but prove to be critical during audits or restructuring:

• Unclear allocation of income: Is it business income, investment income, or capital gains?
• Transfers of use between companies or shareholders – for example, in the case of real estate or financing – carry the risk of constructive dividends or unwanted business splits.
• Inheritance and gift tax issues if the structure is not eligible for tax relief (Art. 13a et seq. ErbStG)
• Lack of documentation for asset transfers or contracts among shareholders

These issues are intertwined and can only be resolved permanently if tax and corporate law structures are considered together.

Articles of association and wills – when form no longer fits reality

Many articles of association date back to the start-up phase – with few shareholders, clear roles, and no succession issues. In practice, however, it is clear that roles, ownership structures, and objectives have long since changed.

Typical weaknesses include: 

• Lack of provisions governing succession, admission, or withdrawal of shareholders
• Ineffective severance clauses or binding voting rights provisions
• Unclear responsibilities in management or shareholder meetings

In addition, there are private arrangements, such as wills or marriage contracts, which are often decades old. They were frequently drawn up when the couple married or started a family – but have not been adapted to reflect current financial circumstances, corporate structure, or shareholder constellation.

In inheritance cases, in particular, this can lead to unplanned ownership structures, deadlocks, or unfavorable tax consequences – even though this could be avoided through early, coordinated planning.

Coordination instead of isolated solutions – why tax and legal advice should go hand in hand

In many medium-sized family businesses, structure with divided responsibilities has developed over the years: tax consulting, legal support, family-internal decisions – these are often organized at different levels.

Such models often work well in everyday life. However, when major changes occur – e.g., succession, structural change, sale, or conflict – the lack of an established overall perspective creates a high need for coordination.

A structured, interdisciplinary approach can help in this respect. It provides clarity on roles, contractual situations, tax implications, and leeway – not with the aim of rethinking everything, but rather to further develop existing structures in a targeted manner.

Conclusion

Family businesses continue to evolve – and their structure should evolve with them: in legal, tax, and organizational terms.

A reasonable interlinking of articles of association, tax structuring, and family arrangements is crucial – in particular in entrepreneurial family structures. 

A professional, coordinated overview provides the basis for this – ensuring that structures remain viable even as the company, its owners, or the environment evolve.