A Holding Company is a company organized and registered with the intention of acquiring equity ownership in other companies. A holding company comprises a limited liability company, parent corporation, or limited partnership that owns sufficient voting stock in another business to control management and policies.
The primary function of a holding company is to own property and assets, which includes both tangible and intangible assets such as:
- Hedge Funds
- Limited Partnerships
- Private Equity Funds
- Real Estate
Basically, a holding company can retain anything that’s of value, in any form. Think of it as an Investor, it doesn't do anything other than lend, borrow, and make investment choices. A holding company plays a significant role of funding or leasing assets to an operating company that’s into any kind of business.
A holding company receives many benefits as outlined in Part 2 of this article, but the most common benefits are better tax rates and protection of assets. Better tax rates provided that there is a business-friendly taxation in the state of incorporation.
A holding company benefits a small business owner because it can protect the high-value assets of the subsidiary company. It protects the assets of the company from loss to the creditors of the subsidiary company as long as the holding company doesn't cosign the debt.
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Thinking about creating a Holding Company give us a call at 740.346.2899 to discuss your business needs today. Be sure to check out Part 2 Benefits of a Holdings Company and Part 3 How to get started with a Holding Company.