Nextica for the Family Business: Protect the Legacy You Have Built
The family business has unique legal and tax challenges: the coexistence of family relationships and business relationships in the same space, planning for generational succession, the taxation of the transfer of the business, and the prevention of conflicts among heirs who are also partners. At Nextica Law & Tax, we have been advising first-, second-, and third-generation family businesses for decades. We understand the critical moments and know how to anticipate them.
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In detail
1. Life succession — the moment of greatest importance and least urgency
Planning the transmission of the family business during life allows you to maximize the available tax benefits (95% reduction in ISD for family business if the requirements are met), ensure the continuity of the business without the tensions generated by unplanned inheritance, and decide who will continue the business and under what conditions. The family protocol and the succession agreements of the Catalan Civil Code (art. 431-1 and ss. CCCat) are the main instruments.
2. Conflicts between family partners
Conflicts between family members who are partners have a personal dimension that makes them especially complex and destructive for the business. At Nextica, we mediate, negotiate, and, if necessary, litigate in commercial courts to protect our client's interests, trying to preserve the family relationship and the continuity of the business as much as possible.
3. The taxation of the family business
The family business has access to significant tax benefits if it meets the requirements of art. 4.8.2 of the IP Law (exemption from the Wealth Tax) and of art. 20.2.c of the LISyD (95% reduction in the ISD): real economic activity, minimum individual participation of 5% or 20% in family group, and active partner remuneration exceeding 50% of their total income.
THE FAMILY PROTOCOL
The family protocol is the document that regulates the relationship between the family and the company: who can be a partner, who can work in the company, how shares are valued and transferred, how dividends are distributed, what happens in the event of divorces or deaths of partners, and how conflicts are resolved. It is not mandatory, but it is the most effective tool to prevent conflicts that can destroy the company in the second or third generation. Its effectiveness depends on it being the result of a participatory process in which the entire family feels represented.
Frequently asked questions
Does the family protocol have legally binding value?
The family protocol is, for the most part, a document of an obligatory nature that binds the signatories but does not have statutory nature. For the provisions of the protocol to be enforceable against the company and third parties, they must be incorporated into the bylaws or a properly formalized shareholders' agreement. At Nextica, we coordinate the family protocol with the corporate documents that give it binding legal force.
What tax advantages does the family business have?
If the company meets the requirements of article 4.8.2 of the IP Law, the shares are exempt from Wealth Tax. If they are also transferred by inheritance or donation, the heirs can apply a 95% reduction on the value of the shares in the Inheritance and Donations Tax (article 20.2.c LISyD), provided that the shares are held for at least 5 years and that the acquirer is a spouse, descendants or adopted.
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