The wealth of the business owner: governance and taxation

The wealth of the business owner: governance and taxation

Development of the wealth of a business owner/shareholder

• Entry of the company in the family wealth (constitution, acquisition, inheritance, donation…)

• Establishment of the business owner

• Business strategy (power takeover of the business owner, responsibility)

• Application of the strategy

• Sale/transmission (sale, donation or death, new cycle)

Need intergenerational vision (vision intergenerationally)

Wealth of the business owner

Family (business-owning) + business (family-owned business) = Dominant ownership and dynastic intention

Main issues of a business owner

Key Issues:

• Business issues

o Who will own the shares in the next generation?

o Who will manage the company in the next generation?

o When transition will take place?

o How do we prepare for that?

• Family issues

o How can we secure acceptance of our succession plan?

o How can we secure the family cohesion?

o The commitment to the family business that is needed.

• Wealth issues

o Who will own the assets?

o Who will run the Family Office (if you have one)?

o When transition will take place?

o How do we prepare for that?

• Personal issues

o What we be the future roles?

o How can we prepare for that?

• Tax & Legal issues

o How do we establish legally optimal structures?

The different strategies adapted to the family business

Publicly listed company want to maximize shareholder value: Growth => Profitability => Stability

Family Business wants to preserve independence: Stability => Profitability => Growth

Pro’s and cons of owning a family business

Strengths:

• Majority stakeholder: quick and responsible decision-making process

• Family: loyalty and trust

• Intergenerational vision: continuity and reflexion on a long-term basis (stability)

Constraints:

• Majority stakeholder: incompetence and abuse of power

• Family: conflicts and limited capital

• Intergenerational vision: risk related to the lifespan

General Partner : peut prendre des décisions

Limit Partner : ne peut pas en prendre

Owner structure

• Sole owner

o Characteristics: ownership and control in the hands of a sole individual

o Challenges: abuse of power/dependence with respect to the owner/succession/accident

• Siblings partnership

o Characteristics: at least two brothers/sisters have the ownership

o Challenges: rivalry/competency/esprit entrepreneurial

• Cousins consortium

o Characteristics: composed by several cousin shareholders

o Challenges: diversity/old rivalry/involvement/cohesion/entrepreneurial spirit

Governance structure

Owner managed

• Characteristics: owner of 100% of the shares and management of the company

• Challenges: competency, dependency, succession, accident

Family managed

• Characteristics: Active and passive shareholders

• Challenges: rivalry, conflict of interests between active and passive shareholders

Family controlled

• Characteristics: