A corporate foundation in Germany offers entrepreneurs who have built up assets over decades a way to pass them on undiminished to the next generation. This foundation is an enticing organisational option in the context of company succession planning in Germany – whether as a corporate holding foundation or an investment holding foundation. In this way, the profits can be used to maintain the company in line with the foundation’s purpose. However, it is also conceivable to set up a charitable corporate foundation in Germany. However, to find the right foundation model for your company, you must consider social, family, and other non-economic factors in addition to economic, legal, and tax factors.
In this context, the German law firm Schlun & Elseven Rechtsanwälte offers skilled and committed legal advice for foundation founders, bodies, and boards in Germany. Our German foundation lawyers outline how you can best protect your private and business assets and help you find a foundation model that suits your situation. Contact us directly for personalised advice on corporate foundations and charitable corporate foundations in Germany.
The Corporate Foundation in Germany: The Structure and Organisation
The corporate foundation in Germany can be organised as a corporate holding foundation or an investment holding foundation. A significant advantage of the corporate holding foundation is that it secures the company long-term, as its existence does not depend on individual shareholders. However, the foundation can stipulate the lifelong continuation of the company in the foundation charter. A corporate holding foundation manages a company without the intervention of another legal entity and acts as the direct owner of the company. The difference from a regular foundation lies in its commercial nature. An indirect relationship exists between the foundation and the company. The predominant form in practice is the foundation with participating interests.
The Investment Holding Foundation
The investment holding foundation is characterised by its function as a sponsor of shareholdings in companies. Its primary purpose is to facilitate long-term investments in other companies and thereby exert a targeted influence on the strategic direction of these companies. In practice, an investment holding foundation is established by a legal entity under private or public law or a charitable foundation in Germany. The advantage of this type of foundation is that it participates in legal transactions as an independent holder of rights and can, therefore, act independently of the fluctuations of the shareholders. The investment holding foundation helps secure long-term economic interests and promote the companies’ stability.
The Corporate Holding Foundation
The primary purpose of the corporate holding foundation is to take over and manage companies in Germany. Under this type of foundation, a company transfers its existing assets to a foundation, which then acts as the company’s sponsor. The aim is to ensure the long-term existence and independence of the company, especially when it comes to the continuation of family-run businesses. The transfer to the corporate holding foundation ensures continuity in management and facilitates business succession planning.
The Establishment of a Corporate Foundation in Germany
The requirements for establishing a corporate foundation in Germany are based on general foundation law regulations. First, careful consideration should be given to which type of foundation suits the company. If, after careful consideration and weighing up all the legal and factual circumstances, it is decided that the corporate foundation is the most suitable foundation model, the foundation statutes can be drafted.
The foundation statutes form the basis of the foundation. Any personnel or economic changes to the company should be considered when formulating the statutes of the foundation. A certain degree of flexibility is allowed within the articles of association to react adequately to future developments in the company. The foundation must be adapted to the requirements of the competent foundation authority. If it is a charitable corporate foundation, it is also necessary to consult with the tax office in Germany.
The establishment of a foundation should be thoroughly planned. The first step is to choose a legal form that considers your objectives and interests. In addition, the foundation concept, particularly the foundation statutes, should be carefully drafted. Our German foundation lawyers advise you on the various legal forms available and their respective advantages and disadvantages.
Taxation of the Corporate Foundation in Germany
The taxation of a foundation is also subject to the general tax regulations in Germany. If you choose the foundation form of a charitable corporate foundation, comprehensive tax exemptions apply for the main types of tax. In the area of income taxation, the foundation benefits from low tax rates for distributions by the company compared to distributions to shareholders who are natural persons. The specific tax rate depends on the legal form of the company in question. These tax incentives not only help to ensure the financial stability of the foundation but also promote the long-term orientation of the company’s activities in line with the foundation’s purpose. Choosing a charitable corporate foundation in Germany can ensure business continuity and guarantee tax advantages.
Practice Group: German Foundation Lawyers
Practice Group:
German Foundation Lawyers
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