Family foundations – what do you need to know?

9 April 2025 | Knowledge, News, The Right Focus

At some point, almost every family business is faced with the decision of how to develop the business they have built with their own hands, while at the same time protecting the capital they have accumulated over the years. A family foundation could be the answer. It is a relatively new instrument in the Polish legal system, which allows for the management and structuring of assets, but above all for the effective planning of succession.

A family foundation is an entity responsible for managing the company’s assets, providing financial security for those designated by the founder – in practice, usually the family – and enabling effective business succession.

Succession for generations

A family foundation is a solution for individuals who wish to protect their wealth. With a foundation, the business can continue for generations, with the assets remaining in the hands of the family or those closest to the founder. The assets will also continue to be managed in accordance with the founder’s wishes as expressed in the foundation’s articles of association and other documents.

By defining both the way the business will be run and the possible paths for its development, the founder can ensure that the new organisation will operate according to the values that are important to them and fulfil their mission and vision. This enables the founder to manage the succession on their own, clearly defined terms.

Maintaining the family character of the business

The main advantage of a family foundation is that it ensures succession in favour of the owner’s close relatives. This solution gives the founder the certainty that the business they have built up will not fall into the hands of strangers and will be able to develop according to their intentions and wishes. In this way, the company can strengthen its position in the market while maintaining its family character.

Effective succession management

With flexible provisions in the articles, the founder can determine the rules of succession and support of the beneficiaries, which helps to avoid family disputes and the fragmentation of assets in the event of the founder’s death.

The founder can also determine the structure of the foundation’s authorities and their rules of operation, which allows the foundation to function according to the family’s individual needs. This may include, among other things, the composition of the management board or the manner in which decisions are made.

Flexibility in the payment of benefits

A family foundation also makes it possible to establish uniform rules for the payment of profits and other monetary benefits from the accumulated assets. In this respect, the founder can determine the conditions under which individual successors can receive the profit. There are no legal restrictions, so everything depends on the will of the founder.

Protection against claims

The assets of the family foundation are kept separate from the private assets of the founder and from the assets of the business managed by the founder. At the same time, these assets are protected from the claims of the company’s creditors. In the event of financial difficulties, either for the company or for the founder, the assets contributed to the foundation are safe.

The security of the founder, who is not liable for the liabilities of the family foundation, is also preserved.  However, the family foundation will be jointly and severally liable with the founder for the latter’s civil law liabilities and tax arrears incurred prior to the establishment of the foundation, but only up to the amount of the assets contributed to the foundation. However, the foundation is not liable for the founder’s liabilities incurred after its establishment.

Tax benefits

It is also worth noting that a family foundation benefits from preferential taxation. Its income can be reinvested tax-free and distributions to beneficiaries are subject to a flat 15% income tax, provided that the beneficiaries are members of the founder’s immediate family.

Who a family foundation is for

Establishing a family foundation is a good choice for people who have accumulated significant wealth. Wealth that is not only to be used during their lifetime, but also for the benefit of future generations. However, the decision to establish a foundation should be well thought out and preceded by expert advice, to optimise the benefits and ensure that it is in line with the family’s objectives.

Specialists will analyse the appropriateness of setting up a family foundation and contributing specific assets to the foundation to enable effective succession. They will identify the benefits, design the structure, including the articles of association and other necessary documents, and assist in the process of establishing, registering and operating a family foundation.

Any questions? Get in touch with us.

Mirosław Malczeski

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Contact us:

Mirosław Malczeski

Mirosław Malczeski

Attorney-at-law / Counsel / Tax Law

+48 608 593 450

m.malczeski@kochanski.pl