Familien-GmbH: What is it and how do you benefit from it?

More and more entrepreneurs in Germany are accumulating considerable assets. It can therefore make sense to secure access to these assets for your wife and children while you are still alive. This is made possible by a Familien-GmbH…

You have already heard about this special form of a German limited company (GmbH) and would like to find out whether you could also benefit from this structure? Are there really only advantages? Or are there also disadvantages you should be aware of?

In this post, I will provide you with the answers to all of these questions around the Familien-GmbH. You will learn:

This post was updated on 2 August 2021.

What is a Familien-GmbH?

A Familien-GmbH is a variant of a German limited liability company (GmbH).

While the same rules apply to the Familien-GmbH as to the conventional GmbH, it serves only one purpose:

to manage the assets of a family and distribute them according to the regulated line of succession. It is therefore a form of asset-managing GmbH, in which several family members would usually participate.

How does this work?

Being the owner of your assets, you contribute the assets to the company.

Thereafter, you transfer shares in the company to your wife and children or any other family members by gift or inheritance.

But beware: To ensure that neither creditors nor children-in-law or possibly a divorced spouse will have access to the assets at a later stage, the articles of association of the Familien-GmbH will have to contain specific provisions.

The regulations grant you (as the owner of the assets) permanent influence over all assets.

What are the advantages of a Familien-GmbH?

1) No trade tax on income from your own real estate: If you exclusively hold own real estate and capital assets in the Familien-GmbH, there will be no trade tax on income from your own real estate other than the 15% corporation tax payable according to section 9 no. 1, page 2 German Trade Tax Act (Gewerbesteuergesetz). And this applies despite the fact that the company is a commercial enterprise of course. This means: You are running a commercial enterprise and you do not have to pay trade tax.

2) A good overview of your assets: The Familien-GmbH is an excellent structure to keep an eye on all of your assets.

3) Inheritance regulations for only one asset: The GmbH holds different assets. However, the Familien-GmbH allows you to regulate even one individual asset of the GmbH under inheritance law. In other words: In your will, you can regulate the line of succession for one asset in the GmbH, even if the GmbH itself holds thousands of assets. If a thousand assets were held as private assets, you could theoretically end up having to create (up to) a thousand regulations for each individual asset.

4) Prevention of the division of assets: With the help of the Familien-GmbH you can prevent assets from being divided after their transfer to the successor generation for reasons of inheritance, divorce etc.

5) Possibility of tax-free profit distributions: Under certain circumstances and with certain applications, profit distributions from foreign shareholdings can be exempt from tax (section 3 no. 41 lit. a Income Tax Law (Einkommensteuergesetz), R 8.1 Corporate Income Tax Guidelines (KStR) to section 8 Corporate Income Tax Act (Körperschaftssteuergesetz)).

But beware: In order to benefit from these advantages, the articles of association of your company must state the right corporate purpose.

It must be quite clear that the Familien-GmbH was founded for the purpose of managing and holding your own assets, especially your own real estate.

What are the disadvantages of Familien-GmbHs you should be aware of?

1) Disclosure obligation: Since the Familien-GmbH follows the same rules as the conventional GmbH, you are obliged to disclose annual financial statements. This could be a disadvantage if you do not wish strangers to have an insight into your assets.

2) High costs of preparing annual financial statements: The costs for the preparation of annual financial statements are the same as for a conventional GmbH and therefore relatively high.

Conclusion: thanks to the Familien-GmbH, only you decide what happens with your assets

As you see now, the Familien-GmbH can be an ideal management solution for family assets of entrepreneurs.

It puts you in a position to sustainably keep your assets in the family. By way of formulating specific provisions in the articles of association, you decide what will happen with your assets.

In addition, you will save trade tax on your real estate and are able to use this variant of a GmbH to prevent a potential division of your assets by heirs, children-in-law etc.

If you are taking the establishment of a Familien-GmbH for the management of your asset into account, you should, however, always seek professional advice.

After all, the Familien-GmbH is not only governed by company, inheritance and family law, but also by tax law.

If you have any further questions regarding this topic or are interested in a detailed consultation, please feel free to contact me by phone (+49 40 44 33 11), e-mail (t.breit@steuerberatung-breit.de) or contact form.

Kind regards,

Thomas Breit

Foto: © Rui Vale de Sousa – fotolia.com