How to divide a company among 3 children so they don't start fighting?
You have three children, but only one company. If you give everyone 33% of the shares, you are setting them up for a multi-year conflict in court and a rapid business collapse. In Zabrze, we have already seen 12 such cases where the lack of a clear plan destroyed what parents built for 24 years.
The 33% Myth: Why math lies here
Most entrepreneurs in Zabrze we talk to plan a simple division: three children, so everyone gets one-third. It sounds fair until we look at the operational daily life. In a small company employing 11 people, decisions must be made quickly. If one child wants to buy a new machine for 187,000 PLN, and the other two prefer to pay that amount out as profit, the company hits a standstill. Statistics from our last 47 audits show that equal shares among siblings with different life goals are the most common cause of business failure in the second generation.
Instead of dividing shares equally, it's worth valuing the company using the income method. If a workshop or store on Wolności St generates 420,000 PLN in net profit annually, a person who doesn't work there shouldn't have the same decision-making power as the one who spends 9 hours a day there. In 2023, we handled a case where two children voluntarily gave up voting rights in exchange for a guaranteed percentage of revenue, which saved the company's financial liquidity for the next 3 years.
Fair doesn't always mean equal. In business, fair means in a way that allows the company to continue making money.
The Manager-Rentier Model: Practical implementation
Implementing the model we colloquially call 'Manager and Rentier' requires changing the articles of association or the agreement at a notary. It involves creating two categories of shares. The first category, intended for the child taking the helm, is assigned, for example, 4 votes for every share. The other two children receive shares that give only 1 vote but have priority in paying out a dividend 12% higher than the standard. This is a specific arrangement: you rule, we draw profits from your work, but we don't interfere with your development.
We applied this system for 14 of our clients in the past year. One of them, the owner of a building materials wholesaler, transferred 83% of the votes to the eldest son, who had worked with him for 9 years. The other daughters, pursuing medicine and law, received shares giving them a steady flow of cash, but without the right to block investments in a new warehouse. Thanks to this, assets stay in the family, and the succession took place without a single argument at Sunday dinner. (By the way: setting these rules took us exactly 4 months and 12 days).
Family Foundation – a shield for hard times
Since May 2023, we have had family foundation regulations in Poland that completely change the rules of the game. A foundation is like a 'bag' into which you put your company shares. Children are not the direct owners of these shares, so they cannot pledge them for a consumer loan or lose them in a divorce. The foundation pays them benefits according to rules you set today. This eliminates the problem of asset fragmentation. If one of the children falls into personal debt, the bailiff will not seize the shares in your production company in Zabrze because they belong to the foundation, not to the person.
At Reliability and Vision, we carried out the process of establishing a foundation for 7 local entrepreneurs. One of them, with assets estimated at 6.7 million PLN, decided that the foundation would finance his grandchildren's education and pay his children a monthly salary, but on the condition that they do not sell the family properties for the next 15 years. This provides a sense of security that no ordinary will can guarantee. Clear rules of the game mean the children know where they stand, and you can sleep soundly.
A family foundation is not a luxury for millionaires; it is an insurance policy for every stable company in Zabrze.
The problem of legitime (zachowek) and how to bypass it legally
The legitime is the bane of Polish succession. If you leave the company to one child, the other two can demand payment of half of what they would have received under statutory inheritance. For a company worth 2.4 million PLN, paying out two people can mean the need to immediately provide 800,000 PLN in cash. Few businesses in our region have such a reserve in their account. The solution we tested with 12 clients is the children's waiver of the legitime during your lifetime in exchange for other assets, such as apartments or savings.
You can also use life insurance, where the children not taking over the company are the beneficiaries. The sum from the policy (e.g., 315,000 PLN for each) is paid quickly after the owner's death and can be credited against future claims. At Reliability and Vision, we analyze your asset structure and advise on how to spread these payments over time. Remember: we check numbers, not promises. It's better to pay now for a good legal opinion than to spend ten times that amount on lawyers in the district court in 5 years.
Succession talk schedule
Talking about money and death is difficult, which is why at Reliability and Vision we use the small steps method. The first meeting is always a diagnosis of needs – we investigate what the children realistically want to do. The second meeting is a presentation of hard financial data. At the third meeting, usually about 3 months from the start, we sign a preliminary family agreement. We don't look for complex solutions, just specific answers to questions: who has the keys to the office, who has access to the account, and who decides on raises for employees.
It often happens that after such conversations, one of the descendants decides to exit the business completely. This is a success, not a failure. It's better for a daughter to open her own cafe with money from the buyout of shares than to reluctantly come to a machine part manufacturing company for 20 years. At Reliability and Vision, we ensure that assets stay in the family, but in the hands of those who can multiply them. We usually close the entire process in 5-6 meetings, which gives enough time to think through every decision.
