It is relatively common for family businesses to develop different activities (for example, because the initial business was consolidated long ago and investments were made in new projects). And in these cases, generational succession can lead to conflicts among the successors: disagreements about which business should be enhanced more, or about who will perform executive functions...

In these cases, it may be interesting to consider a spin-off. With the spin-off, the assets of the company are divided into two or more parts and these assets are allocated to two or more new or existing companies. In this way, each child can inherit a specific company without sharing their ownership with their siblings.

This spin-off does not imply tax costs: the Tax Office acknowledges that simplifying future succession to mitigate potential conflicts among descendants, or the possibility of managing investments separately, are valid economic reasons that justify this operation.

If thespin-off is total–that is, if the assets of the spun-off company are divided and allocated in their entirety to two or more companies– andthe partners participate in each of the new companies in the same percentage they had in the spun-off entity, said spin-off may qualify for the neutrality regime without further requirements.

On the other hand, if thespin-off is partial–part of the activity is maintained in the initial company–, to benefit from the tax neutrality regimethe spun-off assets must constitute a business unit(that is, they must be able to carry out an economic activity on their own).

This requirement (that the spun-off assets constitute a business unit) is also necessary when, whether the spin-off is total or partial, the participation percentages of the partners in each of the new companies are not equivalent to those they held in the spun-off entity. For example, because two entities are established and 100% of the shares of one are allocated to one partner and 100% of the shares of the other are allocated to another partner.

 

We can help you plan the succession of your company, avoiding conflicts and ensuring the continuity of your business.