The family business is subject to several interrelated taxes that require careful management to ensure its continuity and success. Proper planning is crucial as failure to do so can result in disproportionate tax costs that could negatively impact the company’s treasury.
The taxes that affect family businesses include the corporate tax on the company’s profits, personal income tax on remuneration and dividends distributed among partners or shareholders, wealth tax that may apply to the mere ownership of family group shares for some family members, real estate tax and inheritance or donation tax at the time of transfering the business between generations. It is extremely important to plan for this transmission event with a tax strategy in mind.
At CIB, we recommend that tax planning for family businesses be reinforced by a family protocol. This instrument facilitates the agreement and organization of management criteria and principles. It is a set of agreements signed by partners themselves or with third parties with whom they have family ties, that have a common interest in achieving a model of communication, the consensus in decision-making, and regulation of relationships between family, ownership, and the business that affect the entity. The family protocol serves as a shareholders’ agreement.
