Family businesses are the unsung heroes of a nation’s economy, quietly driving sustainable business growth and lending backbone to the market structure. A surprising number of renowned corporations that we know today as public giants started humbly as family endeavors. In Thailand, a lion’s share, precisely 80%, of small to medium-sized enterprises are family-led, while 67% of publicly traded companies on the Stock Exchange of Thailand owe their roots to family origins, accounting for half of the total market value.
These enterprises play a vital role in not just job creation but in cultivating economic resilience that spans across generations. For this reason, one of the paramount obligations of family business owners is to ensure their legacy thrives beyond their tenure. Crafting a succession plan that deftly navigates generational transfer of power can safeguard this legacy, embedding continuity into the family DNA, often documented in a family charter or as part of the corporate mandate.
Beyond merely sustaining growth, these businesses place a premium on wealth preservation and seamless leadership transitions to prevent disputes among kin. The right mix of tax and legal maneuvers serve as a mighty shield for family-owned businesses, laying a robust foundation for enduring success.
In this series, we’ll decode the intricacies of tax, legal, and accounting strategies pivotal to family businesses, from their inception to achieving resource maturity.
Why the astute family business owner should prioritize tax and legal foresight:
Diving headfirst into growth, family business owners often skirt the edges of tax and legal pitfalls. Without a keen eye on internal controls and risk mitigation, these pitfalls can snowball into financial penalties.
Herein lies the beauty of tax planning — a tool that enhances tax efficiency and cements a worry-free future for your enterprise. Establishing a well-structured consortium grants the agility needed to attract investors or gracefully divest shares when opportunities arise. However, tax burdens can become formidable gatekeepers if not managed, particularly evident when due diligence reveals fiscal red flags that may deter potential buyers.
A strategic succession plan should also tackle potential inheritance tax and gift tax liabilities head-on. The lack of foresight in these arenas often causes promising family businesses to falter as they transition to new hands, sparking internal conflict or, worse, ceding control to outside investors.
Consider Heineken, a business pillar sustained over three generations through well-orchestrated layers of holding companies that ensure smooth transitions. In contrast, BMW’s family leadership story is one of strategic foresight, seamless transitions, and steadfast values, making it a beacon among family businesses worldwide.
In Asia, Lee Kum Kee stands as a testament to disciplined family business strategy. Since 1888, this Hong Kong-based food company has thrived by establishing comprehensive governance structures like a family council, investment centers, and a family charter, asserting that a sustainable business is moored to a sustainable family.
These tales of familial success underscore the quintessential role of tax and legal planning. A well-designed corporate structure, cohesive family assent via charters, and clear company obligations are essential molds of success. Starting early with these preparations virtually guarantees better outcomes.
Looking Ahead:
Every family business twists its own path, unique as a fingerprint. Future articles will delve into crucial tax and legal considerations such as the role of holding companies, restructuring for tax efficiency, leveraging business combinations, and preparing accounting resources for expansion.
Our Expertise at Your Fingertips:
At Forvis Mazars, we cherish the unique dynamics of family businesses. Our seasoned, dedicated professionals partner with your family to realize your aspirations. With our presence in over 100 countries, we offer a tapestry of solutions — from tax strategies and audit services to legal counsel and financial advising — across industries and borders.
If you have insights to seek or need personalized guidance, feel free to reach out:
Parin Supsavaipol, Tax Director at [email protected]
Chatchawat Kriengsuntikul, Legal Partner and Head of Legal Practice at [email protected]
This article is enlightening! Family businesses are truly the backbone of economies, especially in dynamic markets like Thailand.
Not all family businesses thrive. Without proper management, they can collapse overnight.
Exactly, Bob. That’s why having a solid tax and legal strategy is crucial for their longevity.
I didn’t realize that family businesses make up such a large percentage of companies in Thailand. It’s impressive but also a bit concerning regarding diversity in business ownership.
Diversity is great, but family businesses carry cultural heritage and values which can be vital for society.
I see your point, John. Perhaps it’s about striking a balance between family ownership and inviting new ideas.
The references to Heineken and BMW are spot-on. It’s proof that strategic planning is universal in family business success.
True, Eduardo. However, not every family can emulate these giants. It requires capital and access to resources.
Without adequate planning for succession, many family businesses face internal conflicts and eventual decline.
That’s why initiating family charters and councils early on is so important.
Yes, and it needs consistent revision to adapt to new challenges.
What happens when a family business doesn’t seek legal advice? Doesn’t that jeopardize their position in the market?
Absolutely, Nancy. Ignoring legal and tax foresight is a fast track to financial losses and disputes.
I love how this article highlights tax efficiency. Many businesses overlook these opportunities and end up overpaying.
It’s interesting how global companies function similarly to some family businesses when you look at their internal structure.
Do articles like this get to the people who really need it? Often, smaller family businesses don’t have access or prioritize such resources.
That’s a good point, Tom. There’s a gap that needs to be bridged between educational resources and accessibility for smaller enterprises.
True, Tom. But initiatives like business seminars can make a difference.
Forvis Mazars seems to offer comprehensive support, but it might be costly for small family-owned businesses. How do they reconcile this issue?
High fees vs. potential long-term savings? It would be interesting to see a case study on this.
The article doesn’t address digital transformation in family businesses. Isn’t that a pressing need today?
Digitalization is indeed important, but aligning it with family values can be challenging for these businesses.
Digital transformation is another layer to this complex topic, Georgina. It requires its own strategy.
Family dynamics can be more destructive than tax issues in some cases. It’s an emotional minefield.
Absolutely, Sawyer. That’s why some businesses fail despite having strong financial groundwork.
The mention of Lee Kum Kee serves as a great example for successful Southeast Asian family businesses.
Reading this article, I wonder about the future of family businesses in an increasingly globalized market.
Globalization can be positive if these businesses adapt and leverage global networks and technology.
Inheritances taxes can be an insidious threat. Planning should start from day one.
So informative! But does Forvis Mazars also emphasize the ethical dimensions of family business governance?