Family Offices as a tool for Succession Planning
- Neha Lodaya
- Dec 7, 2024
- 1 min read
The promoters of Godrej have launched a new family office to invest in new age businesses. Typically, a family office is an entity created by HNIs and UHNIs to manage the families assets, investments, succession planning, taxation and legal aspects.
Considering the goal is essentially to protect the heritage assets in a tax efficient way and to have a steady flow of income to the family members, it is crucial to analyse the structure to set up such family offices, given the regulatory nuances.
For example, distribution of income from an LLP is exempt in the hands of the partners, however, the rate of tax as applicable to LLP is as high as ~35% as compared to a private limited company which is now pegged at 25% . However, considering the asset size of the company, the Group will require to separately analyze the regulatory compliances / registrations it may require, thereby increasing the compliance burden.
Setting up a Family Trust may also be considered as an option, but may require only certain set of individuals who would qualify as "relatives" to become beneficiaries of such Trust from a tax efficiency standpoint.
