What is a family foundation?

A family foundation is a special form of foundation that primarily serves the purpose of preserving and increasing a family’s assets in the long term. In contrast to charitable foundations, which are geared towards the common good, the family foundation is primarily concerned with private interests, namely the protection of family assets and the provision for family members.

Important features of a family foundation:

• Asset protection: the assets are transferred to the foundation and legally belong to the foundation, no longer to the founder or the heirs
• Long-term nature: A foundation is generally set up for an indefinite period and remains in existence for several generations
• Tax optimization: clever structuring can reduce gift and inheritance taxes as well as income taxes

Why set up a family foundation?

A family foundation offers numerous advantages, especially for wealthy families, entrepreneurs and property owners who want to protect and optimize their assets in the long term. Of course, real estate can be transferred to foundations. Here are the main reasons why you should consider a family foundation.

• Protection from inheritance disputes: Since the assets belong to the foundation and are not inherited directly, inheritance disputes can be avoided
• Tax advantages: Income generated within the foundation is usually subject to a lower tax burden. Inheritance and gift taxes can be saved
• Control over the assets: The founder can specify in the articles of association how the assets are managed and who benefits from them
• Avoidance of asset fragmentation: assets remain bundled and are not divided up by sale, inheritance or private disposal

Who establishes a family foundation?

For those who want to save taxes! Only 15% on rentals, protection against access and many other benefits, especially for your loved ones.

Now you could say, 15% on rent and protection against access, a GmbH holding company can do that too, right! But – and we’ll come to this in a moment in the functions – the transfer of assets in particular is one of the tools that families choose for foundations.

Typical founders of a family foundation are

• Entrepreneurial families: It is particularly common for entrepreneurial families to want to keep their company in the family for the long term
• Property owners: Families with large real estate assets who want to secure their property and optimize it for tax purposes
• Wealthy private individuals: Anyone who has considerable capital and wants to protect it from external risks (such as divorce or creditor access)

As a rule, it is worth setting up a family foundation with assets of at least 1 million euros. Above this threshold, the advantages associated with a foundation begin to outweigh the establishment costs and administrative expenses.

How does a family foundation work?

The process of setting up and managing a family foundation can be complex, so it is important to plan the steps carefully:

1. Advice and planning: You should first seek advice from experts – lawyers, tax advisors and foundation experts – to understand the legal and tax framework
2. Creation of a foundation charter: This charter is the “basic law” of the foundation. It defines the purpose, who is a beneficiary and how the assets are managed
3. Contribution of assets: The founder contributes his assets to the foundation. From this moment on, the assets legally belong to the foundation and no longer to the founder
4. Recognition by the foundation authorities: The foundation must be recognized by the responsible foundation authority and the tax office
5. Administration and ongoing support: The foundation’s Board of Directors manages the assets and ensures that the foundation’s purpose is fulfilled

Advantages of the family foundation at a glance

• Asset protection: No access by third parties (e.g. in the event of divorce or insolvency)
• Tax advantages: Reduction of inheritance, gift and income taxes
• Long-term wealth planning: protection and management of assets over generations
• Avoidance of inheritance disputes: Clear regulations through the foundation statutes
• Flexibility and control: The founder can customize the articles of association and thus retain control

How do you set up a family foundation?

If you are considering setting up a family foundation yourself, here is a brief overview of the necessary steps. A little tip, I have explained the whole thing in more detail here in Establishing a family foundation and here in Family foundation costs:

1. Advice from experts: get professional help from lawyers, tax advisors and foundation experts
2. Define the foundation’s purpose: What should the foundation achieve? Who should be the beneficiaries?
3. Create legal documents: The foundation statutes and other founding documents must be drawn up
4. Contribute foundation assets: Transfer real estate, capital or other assets to the foundation
5. Registration and recognition: The foundation must be recognized by the competent authorities
6. Managing a foundation: Regular review and adaptation to legal and tax changes

Conclusion: Is a family foundation right for you?

A family foundation can be a powerful tool to protect assets, plan for the long term and save taxes. However, it is not suitable for everyone and requires careful planning and advice. If you think a family foundation may be right for you or your family, get expert advice and make sure all aspects are well thought through.

You can now find out more about this on Steuern Sparen One – my experts for setting up foundations and tax optimization.

Transfer real estate: example including foundation

Transferring a property to a family foundation in Germany can be a complex process involving legal and tax aspects. It is advisable to seek advice from an experienced lawyer or tax advisor to ensure that all legal requirements are met.

Please note that this is only a general overview and the exact steps and requirements may vary depending on the individual situation and the applicable laws in Germany. Therefore, it is important to seek advice from foundation experts to ensure a smooth and legally sound transfer.

How do I transfer a property to a foundation?

Basically, there are several steps that should be followed when transferring a property to a family foundation:

The right setup of your foundation: preparation

If you don’t already own a family foundation, you need the right setup first.

Establishment of the family foundation

First, a family foundation must be established. This requires the creation of a foundation deed, which defines the purposes of the foundation, the beneficiaries and other relevant details.

• Establish a family foundation

Selection of the property

The property to be transferred to the family foundation must be selected. Make sure the transfer is compatible with the goals and purposes of the foundation. A family foundation often aims to preserve assets for generations. Therefore, the property selected should provide long-term stability. Factors such as location, sustainability of the real estate market, and potential performance are important to ensure the long-term preservation of the asset’s value.

Valuation of the property

The property should be appraised by an independent appraiser to determine the current market value. This is important for tax purposes and to ensure that the transfer is made on reasonable terms.

• Evaluate property

Transfer agreement – step 1

A transfer agreement must be drawn up between the previous owner and the family foundation. This contract regulates the transfer of the real estate and all associated conditions. In terms of its structure, it will certainly remind you of a typical contract of sale of a property.

Structure of the transfer agreement: example

The contract should begin with an introduction identifying the parties to the contract. Here, the previous owner (seller) and the family foundation (acquirer) are named.

1. Description of the property
2. Purchase price or transfer conditions
3. Delivery and transfer of ownership
4. Warranties and liability, other conditions
5. Consents and approvals
6. Place of jurisdiction and arbitration agreement

Description of the property

Describe the property accurately to avoid misunderstandings. This includes details such as address, land register number and a precise description of the premises.

Purchase price or transfer conditions

The contract should specify the purchase price or the conditions for the transfer of the property. This can be, for example, a fixed purchase price, a symbolic amount or other agreed consideration.

Delivery and transfer of ownership

The time and method of transfer of the property should be specified in the contract. This includes the transfer of title, handover of keys and all relevant documents.

Warranties and liability

The contract may contain provisions on warranties and liability. For example, the seller may provide warranties about the condition of the property or exclude certain defects. Limitations or exclusions of liability can also be agreed.

Other conditions

The contract may contain further conditions and provisions governing the rights and obligations of both parties. This may include, for example, provisions on ancillary costs, maintenance, rights of use or similar.

Consents and approvals

If certain consents or approvals are required for the transfer (e.g. consent of co-owners, consent of banks), these should be recorded in the contract. The contract may contain provisions for termination, e.g., in the event of non-fulfillment of the terms of the contract or other agreed circumstances.

Place of jurisdiction and arbitration agreement

The contract may contain a choice of court or arbitration agreement to determine which court or arbitration tribunal has jurisdiction in the event of a dispute.

The contract should be signed by both parties to ensure its validity. It may also be necessary for witnesses or notaries to certify the signatures.

Registration in the land register – step 2

The transfer of the property must be recorded in the local land register to legally document the change of ownership.

Check tax and legal aspects – Step 3

Transferring a property to a family foundation can have tax implications. A tax expert / foundation expert can help you develop the best tax strategies and file the necessary tax returns.

An attorney should oversee the entire transfer process to ensure that all legal requirements are met and that there are no legal risks.

With my experts you will establish your company safely and with all tax advantages.

• Establish a family foundation
• Contact

Successful real estate investing: Why Coaching?

The real estate market offers a variety of opportunities for investors to increase their wealth and build long-term financial stability. By acquiring expertise and applying proven strategies, real estate investors can be successful. In this article, I will show you what topics are commonly taught in good real estate investment coaching so that you will have a good real estate coaching experience. A comprehensive overview of the various aspects of real estate investing.

Investment Coaching at a glance

The first challenges

One of the first challenges is to take advantage of tax benefits and effectively build private assets. By converting loans into equity and assets, investors can legally pass on costs to the tax office.

Offmarket real estate acquisition

Another important step is offmarket real estate acquisition. This is about learning the most effective approaches to finding profitable real estate listings. Learn which strategies lead to success and which are a waste of time. By establishing contacts with multipliers and target group owners, investors can gain access to lucrative offers.

Identify potential megadeals

The ability to identify potential megadeals is critical. There are proven methods to filter deals and identify promising investment opportunities. Experienced investors know when to say “no” and when it is worth investing in promising leads.

In addition to property acquisition, it is important in good real estate coaching to know additional tactics to make successful investments. From legal aspects to network building to team building to identifying and avoiding risks, a comprehensive knowledge in these areas is essential.

Real estate financing

Real estate financing is another important aspect that investors should master. From the basics of financing to advanced techniques and expert strategies, a sound knowledge of the various financing options enables a solid foundation for successful real estate investments.

Corporate form and holding structure

Choosing the right corporate forms and holding structures can have a significant impact on the success of real estate investments. Investors should familiarize themselves with the various options and weigh the benefits and risks of each.

Asset protection through foundation

Asset protection also plays an important role. By setting up foundations or other hedging mechanisms, investors can protect their assets from creditors, banks and other risks.

Buy and rent

After acquiring a property, it is crucial to increase its value through leasing and targeted value creation measures. By adopting the right leasing strategy and avoiding typical pitfalls, investors can derive maximum benefit from their properties.

Renovation and refurbishment

Property renovation and expansion are also important aspects to increase value. Investors should familiarize themselves with the basics of renovation and upgrading and know the best strategies to maximize value appreciation in a cost-effective and stress-free manner.

Real estate acquisition

Building a strong team and the ability to network effectively are also critical to success as a real estate investor. By working with competent partners and making valuable contacts(real estate acquisition), investors can increase their chances of profitable growth.

Identifying and avoiding risks is the be-all and end-all. By knowing the deadliest risks and applying appropriate preventive measures, investors can improve their chances of success.

Real estate sale

Selling real estate and commercial real estate trading are other aspects that must be mastered in order to achieve the maximum profit from real estate investments. From acquisition to negotiation to successful sale, effective strategies are required.

Overall, real estate investing offers great potential for financial stability and growth. By learning the key insights from various modules, investors can expand their knowledge and skills and successfuly enter the real estate market.

Real Estate Investment Coaching

Whether it’s a seminar, workshop, online or 1:1 coaching. If you already have a basic understanding of real estate investing, real estate coaching can help you learn much more and develop your skills. It gives you the opportunity to go deeper into different topics and learn expert strategies to succeed in the real estate market.

A coaching for all areas

Comprehensive real estate coaching covers a variety of topics, including taking advantage of tax benefits, offmarket real estate acquisition, identifying potential megadeals, and asset protection through trusts. You’ll also learn about important aspects such as real estate financing, corporate forms and holding structures, buying and leasing, renovation and redevelopment, building a strong team, and risk identification and avoidance.

Furthermore, the sale of real estate and commercial real estate trading are also covered in order to achieve the maximum profit from your investments. In-depth knowledge in all these areas will enable you to make informed decisions and improve your chances of success.

Learning from experience: that’s what it’s all about

Through real estate coaching, you can expand your knowledge, gain valuable insights and benefit from the experiences of experienced investors. It’s an investment in your personal and professional development as a real estate investor. Take this opportunity to realize your full potential and successfuly enter the real estate market.

These articles might also help you:

• Real Estate Coaching Experience
• Real Estate Coach

Tip. Learn the basics with my real estate app:

• Real Estate Coaching App

Why do you establish a family foundation?

When establishing a foundation, the founder transfers assets to an independent legal entity. Transferable assets include cash, real estate, shares, fixed deposits, and participations. In a family foundation, this wealth is exclusively used to support the founder’s family — across several generations.

The three main reasons for a family foundation

1. Intergenerational transfer without inheritance disputes: Assets do not go into the estate — statutory share claims become void (provided the ten-year deadline is met)
2. Asset protection: Protection against access by spouses (marital assets), creditors, company insolvency, and statutory share claimants
3. Tax optimization: Ongoing income is taxed at approximately 15 % corporate tax + solidarity surcharge instead of up to 45 % income tax

The most important things about a family foundation at a glance

Advisor: necessary or luxury?

The establishment of a family foundation is unique and practically irreversible. A faulty bylaw can only be amended later with the approval of the foundation authority — and even then only within narrow limits. Those who cut corners here risk seven-figure tax disadvantages over decades. Advice is not a luxury, but an economic necessity.

Family Foundation Costs in Detail

The most common question: What does a family foundation really cost? The answer depends on three factors — type of assets, complexity of the family structure, and federal state. Here is the full breakdown.

One-Time Founding Costs

Annual running costs

• Bookkeeping & Year-End Accounts: 1,500–6,000 Euro
• Tax advisor (corporate tax return): 1,000–4,000 Euro
• Board compensation (if external board): 0–10,000 Euro
• Auditors (from a certain size): 3,000–15,000 euros
• Stiftungsaufsicht / Berichtspflichten: 0–500 Euro

Hidden costs

• Succession tax every 30 years: The foundation’s assets are treated as if they were inherited by two children — tax exemption 2× 400,000 euros
• Transfer tax on contribution: Often forgotten; for a rental property worth 2 million euros = up to 130,000 euros
• Gift tax on initial furnishings: Family foundation is considered the “most distant relative” — tax class III, only 20,000 Euro tax exemption (exception: favored family foundation with application of tax class I)
• Later amendment of the bylaws: Any subsequent amendment costs again 3,000–10,000 euros plus administrative procedures

Minimum capital of a family foundation

The Civil Code (§ 80 BGB) does not specify a concrete minimum capital requirement. The capital merely needs to be sufficient to ensure the “permanent and sustainable fulfillment of the foundation’s purpose.” Specifically, this means: The foundation authorities of the federal states set their own thresholds.

Minimum capital by federal state (guidelines)

Rule of thumb: When does a family foundation really make sense?

Even though legally 50,000 euros suffice — economically, a family foundation only makes sense starting with a transferable asset of about 1 million euros. Reason: With annual running costs of approximately 5,000 euros, the tax savings must permanently exceed these fixed costs. With a property management real estate structure generating an annual rental surplus of 50,000 euros, the foundation already provides a tax advantage of 12,000–15,000 euros per year.

Special Case: Non-Independent Trust Foundation

These legal constructs are not independent legal entities, but a contract between founder and trustee. Advantages:

• No official recognition required
• Minimum capital freely selectable (often already meaningful from 25,000 euros)
• Founding costs 30–50 % lower
• However: Weaker asset protection, dependent on the trustee

Tax Implications as a Central Cost Factor

For every donor, it holds true: The advisory costs of 20,000–40,000 euros are economically irrelevant if the tax structuring is done properly. The real levers lie in the ongoing taxes and the transfer itself.

Comparison: Individual vs. GmbH vs. Family Foundation

The succession tax — the most critical cost factor

Every 30 years, the family foundation is treated tax-wise as if the entire wealth were inherited by two children. This means:

• Exemption amount 2× 400,000 euros = 800,000 euros tax-free
• Tax class I (favored)
• With a foundation wealth of 5 million euros: succession tax approx. 600,000–800,000 euros
• Deferral possible for up to 30 years

Insider Strategy: Before the 30-year period, distribute wealth exclusively or reduce the taxable base through sub-foundations / holding structures.

Calculation Example: Family with 3 million Euro real estate assets

Consultancy costs and selection of the right experts

The foundation law in Germany is not uniformly regulated at the federal level — each federal state has its own foundation laws. In addition, there is the interface with tax law, inheritance law, and corporate law. Therefore, comprehensive advice is not a luxury.

Typical Advisor Fees by Wealth

Cash Foundation vs. Real Estate Foundation — Cost Difference

A pure cash foundation is significantly cheaper to establish than a real estate or corporate foundation. Reasons:

• Appraisal reports are not required (the value of cash is obvious)
• No land transfer tax
• No entries in the land register
• Simpler communication with authorities

Setting up a foundation can already be covered with 12,000–15,000 euros. When transferring a medium-sized company, there is no upper limit to the costs — fees of 150,000 euros+ are realistic.

Not every advisor is equally qualified

Setting up a foundation is a one-time and irreversible process. Choosing the wrong advisor here can cost you for decades. A typical negative example: A donor with 8 million euros in real estate assets is advised by a generalist, overlooks the land transfer tax trap, and ends up paying 320,000 euros more than necessary.

Check

]]> https://lukinski.com/corporate-income-tax-kst-simply-explained-ug-gmbh-other-legal-forms/ Mon, 08 Mar 2021 13:52:40 +0000 https://lukinski.de/corporate-income-tax-kst-simply-explained-ug-gmbh-other-legal-forms/ Corporate income tax – Most legal forms of business are subject to taxation. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. Who pays corporate income tax? How much is corporation tax? What do you have to pay corporation tax on? An overview! Back to: Taxes.

Corporate income tax (KSt) – tax for legal entities

Corporate income tax – KSt for short – is usually levied on the income or profit of legal entities domiciled in Germany and is thus complementary to income tax (ESt), which is usually levied on individuals. Taxable persons typically include corporations, associations, cooperatives and foundations. A limitation of corporate income tax comes into play, for example, if the management and headquarters of the legal entity are located abroad. Political entities, federal companies, state banks and social security funds, professional associations and some others are fully exempt from the obligation to pay corporate income tax.

Other taxes for businesses:

• Income tax (ESt)
• Capital gains tax (KapESt)
• Value added tax (VAT)
• Trade tax (GewSt)

If you want to learn more specifically about taxes for real estate companies, you can learn more here:

• Save taxes on real estate

Corporate income tax in detail: collection, levy & allowances

As a corporate tax, corporate income tax counts as a community tax and is levied by both the federal government and the states. The amount of the levy is calculated on the basis of the taxable income, which is the result of the profit less special expenses and extraordinary burdens, and is currently 15 percent plus the solidarity surcharge (SolZ), resulting in an overall tax rate of 15.825 percent. Corporate income tax is payable quarterly on March 10, June 10, September 10 and December 10 in equal instalments as an advance payment and is offset against the actual tax liability at the end of each fiscal year.

Dates for advance payment of corporate income tax:

• March 10
• June 10
• September 10
• December 10

As a rule, the corporate income tax return must be filed by 30 April of the following year at the latest for the preceding tax period. Extensions are possible under certain circumstances. Members of the tax advisory professions are generally subject to different deadlines for filing the corporate income tax return.

Allowances for companies without profit distribution

Companies that do not distribute profits – for example non-profit associations – can benefit from a tax-free allowance of currently 5,000 euros, whereas agricultural and forestry cooperatives and associations may be entitled to a tax-free allowance of 15,000 euros. For companies that record losses within the valid tax period, taxation does not apply at all.

Which companies are subject to corporation tax?

Most legal entities are subject to corporate income tax. All corporations – limited liability companies (GmbH), stock corporations (AG), partnerships limited by shares (KGaA), etc. – as well as cooperatives and business cooperatives are usually affected. In addition, mutual insurance companies and mutual pension fund associations have to meet their corporate income tax obligation, as do institutions, foundations, associations, etc. Commercially active public corporations – for example, transport companies or public utilities – are also affected by corporate income tax.

• Associations
• Institutions
• Foundations
• Corporations
• Acquisition cooperatives
• Business cooperatives
• Mutual insurance companies
• Mutual pension funds
• Commercially active public bodies

Partnerships such as the general partnership (OHG) or the limited partnership (KG) are generally not subject to corporation tax or income tax, but the natural persons and legal entities with partner status belonging to them are. The profit generated by the partnership is subject to uniform and separate determination and is allocated directly to the individual partners in accordance with their legal form: Legal entities must charge their profit shares to corporation tax, natural persons to income tax.

• Partnerships: Legal entities with profit shares

Political parties, professional associations, charitable corporations and federal corporations are generally exempt from corporate income tax.

Overview of company law forms

You can find more information about the different legal forms under the following links. Starting with the sole proprietorship and the registered traders… to the various partnerships and corporations… to other companies such as the family foundation – all the essential aspects of formation, liability, tax burden and more explained simply and understandably! First of all, an overview of the individual legal forms of companies:

• Sole proprietorship (EU)
  • Freelancer
  • Small business
  • Registered traders (e. K.)
• Silent partnerships
• BGB companies / civil law partnership (GbR)
• Partnerships
  • Limited partnership (KG)
  • General partnership (OHG)
  • Limited Liability Company and Company Limited Partnership(GmbH & Co KG)
  • Limited Liability Company and Compagnie General Partnership(GmbH & Co OHG)
• Corporations
  • Stock corporation (AG)
    • AG & Co KGaA
  • Partnership limited by shares (KGaA)
  • Limited liability company (GmbH)
    • GmbH & Co KGaA
  • Entrepreneurial company / UG (limited liability)
  • European Company / Societas Europaea (SE)
    • SE & Co KGaA
• Other companies
  • Foundations / Family Foundations
  • Insurances
  • Partnerships
  • Registered associations (e. V.)
  • Registered cooperatives (e. G.)

Taxes in Germany: List

Corporation tax (KSt), income tax (ESt), capital gains tax (KapESt), turnover tax (USt), trade tax (GewSt) – who pays what? In this overview of the different types of taxes / tax forms in Germany, you will find relevant taxes for you as an individual and for your business, depending on which legal form you have chosen. Also, after the tax list: How does the tax cycle work around month-end closing, year-end closing and balance sheet? A little insight for those starting their first company. What taxes are there? Simple explanations, definitions, tax optimization, an insight into taxes.

• Taxes: List

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