Start a Holding Company

You might be operating several businesses and at a loss on how to contain your assets so that they are adequately protected. Have you considered forming a holding company?

In addition to risk protection, you can get several other advantages in doing so. Read on and discover the benefits of forming a holding company.

Definition of a Holding Company

A holding company can be a parent company that owns the majority of the shares of another company or a company that conducts no business but holds the assets of one or multiple operating companies. The latter is a “pure” holding company because there are also holding companies that, themselves, operate. Usually, it happens that after operating successful businesses, the owner would decide to form a holding company.

Advantage of a Holding Company – Liability Protection

There are several reasons why people start a holding company -- one being that it protects the assets by minimizing exposure to risks and by keeping creditors at a distance. The protection lies in the fact that the holding company performs no transactions and therefore doesn't move properties and cash around. The liability remains in the operating companies – those that produce goods and services and retain employees. The holding company is exposed to the risk only to the extent of its investment in the operating business. And when the holding company lends money to the operating company, it usually secures a priority lien on the collateral for the mortgage. In this scenario, the holding company becomes a secured creditor and thus has priority to get what it loaned when collection time comes.

Advantage of a Holding Company – Tax Benefit

Another advantage of forming a holding company is the possibility of tax reduction in that a holding company that owns at least 80% of a subsidiary's voting stock may benefit from tax consolidation, which allows tax-free dividends to the holding.

Similar Articles

Other Advantages of a Holding Company

As an add-on, the holding company shares in the subsidiaries’ goodwill and reputation while not directly bearing the risks that they have. And it can operate while being isolated from taxation, accounting, and legal problems faced by entities operating in other jurisdictions.

And in this form, it is in a better position to raise capital from the securities markets than its smaller members. Management-wise, it permits centralized control of policies governing the operating entities without intruding into their operations.

Holdings v. Merger and Consolidation

A merger or consolidation also offers the same possibility of containing a smaller entity within a bigger one, but the formation of a holding company is seen as advantageous in that it allows the holding to control a significant part of the operations with only a fraction of ownership and relatively minimal investment. It is also less complicated and costs less because the process would only require simple purchases of stock, and won’t involve shareholders having to decide whether or not they favor a merger or consolidation.

Recommended Articles

  • Ways to Market your Company
    Marketing your company is very demanding in terms of efforts. But with the key information that was stated, you will definitely find it easy to do it.
  • Branding Strategy for a Company
    Company branding may seem like a technical marketing concept to you but we have put it in much simpler and understandable terms here. Read on and know what exactly company branding strategy is all about.

59 Comments

  • Eliza said on June 17, 2009
    I'm new to the biz world but have many ideas. I'd like some more information on holding companies. Also I'd like to know if as a citizen of one country can I register a biz in another and how does that affect taxes? Do all businesses have to be registered in other countries or are you able to operate without registration as in your own country?
  • Serdar Tuygun said on September 10, 2009
    how can l start a holding company and what kind of paper works needed? thanks
  • sam rawane said on October 5, 2009
    how to start a holding company as a group and what paper works needed? regards, Sam
  • Lopeti Lanivia said on December 2, 2009
    I want to start a holding company in Burpengary, Qld, Australia. I would like to have more information on it.
  • ron gantt said on January 17, 2010
    I am in Jacksonville, Florida, USA., i would like to form a holding company for my two corporations., and i would like to know what paper work is needed and maybe a step by step of how to make sure the assets belong to the holding company
  • Kelvin Tinashe said on January 19, 2010
    i am in Harare, Zimbabwe and i would like to start a holdings company with several entities what kind of paperwork and laws should i go through to establish my entity
  • elvie petalcorin said on February 3, 2010
    cebu city, philippines. How to start a holding company and what are the requirements?
  • Nikki said on February 24, 2010
    Trinidad and Tobago West Indies. What are the disadvantages of establishing a holding company
  • Delroy Robinson said on May 11, 2010
    I am in Dover, Delaware, USA., I would like to form a holding company for a few of my corporations. I would like to know what paper work is needed, or if possible a step by step of how to began the process. If there are other sources that you can refer to aid me in my endeavor please feel free to mention them.
  • annie r. said on May 15, 2010
    I am opening a professional building with several different companies ranging from a childcare center to insurance services. How do i go about setting this up as a holdings company. How do i purchase the property under the holdings company? and lastly how exactly do i get capital through stock shares if this is a completely new business?
  • Ricky Goings said on May 20, 2010
    I would like to know the disadvantage of a Holding Company
  • Mandeep Kaur said on May 25, 2010
    Hello, I am in Brampton, Ontario Canada. I would like to know advantages and disadvantages of a Holding Company. Thank you, Mandeep
  • Jean C Regalado said on June 1, 2010
    Pompano Beach, FL United States. Is there a minimum requirement to start up a holding company. If I want to hold businesses, stocks, and real estate?
  • Daniel said on June 8, 2010
    to answer all your questions HIRE A LAWYER!
  • Ravinder singh said on June 30, 2010
    I have a third plan starting a insurance broker co. in Manila. Kindly guide me about the various formalities required.
  • Ed Abbasi said on August 18, 2010
    i Own a franchise of cici's pizza i am opening another location , would forming a holding company help me be more in control of both businesses ? both locations are under 2 different corp
  • Thato Makwela said on January 4, 2011
    I would like to start a holding company but i do not have any operating corporation(s), is it possible for me to form a holding company without any operating corporations? Thank you.
  • Mduduzi Gama said on January 26, 2011
    Hi, I am in South Africa, I have registered my company and in the process to establishing it properly, but one thing I have come across is the difficulty of networking and getting to know the right people since because is sometimes done through relationships. I would like to know how to enhance my ability to identify and network with the relevant people. I have many other question, thank you
  • yen said on January 26, 2011
    i'm in malaysia. what is the cost involve on setting up the company in malaysia and procedures
  • rio jane said on January 31, 2011
    hi, i am in philippines, i would like to start a holding company but I am in the philippines, is it legal in the philippines? what are the requirements to set it up? how to establish a legal dummy incorporation?..t please do a reply to my acct.thank you so much
  • jlen said on February 9, 2011
    What are the tax requirements for opening a holding company?
  • Thomas Provencher said on March 5, 2011
    I am buying a Resort in Canada with a nephew who is Canadian and understand that a corporation not controlled by a Canadian hence would be liable to a higher canadian tax rate. How can I filter any profit back to US by forming a holding company in the US and could there be a tax saving
  • zards said on May 11, 2011
    i would like to know how could i register a holding company in the philippines,please.
  • Vusi Mabona said on July 29, 2011
    hi i would like to know. if you already have a holdings company is there a need to register all the other companies that are under it or can a business proceed with operations without being registered because it is already under the holdings company?
  • Cherrie B. said on August 4, 2011
    Hi. I'm in Philippines. I want to know the basics of establishing a holding company in the philippines which includes a bank as one of its subsidiary.
  • given mdluli said on September 16, 2011
    hi, can you help me by assisting with the registration of a holding company. i'm in south africa,witbank
  • Snethemba Hlongwane said on October 6, 2011
    Pietermaritzburg KwaZulu-Natal South Africa. I'm in a position where I am a major share holder in both companies I am register with. I am also executive in my duties and perform most executive operations within both companies. What I would like to know is that, how do I form a relationship with myself and these two businesses, so that at times I am not stuck in between. How to identify potential investors and persuading them. Kind Regards S.Hlongwane
  • Ruth McGongial said on October 30, 2011
    A friend of mine is starting up a towing business. He already has a used car dealership and mechanic shop. How would starting up a holding company benefit him?
  • Wayne said on December 1, 2011
    Located in Alabama. How to setup a for profit land holding company?
  • mark said on December 29, 2011
    I too would like to know how to start a holding company, paper work, forms etc. Can you lead me in the right direction Mark
  • m.a.adubofour said on January 9, 2012
    can i get a template indicating how to draft the terms of a holding company
  • bhaye saumtally said on February 17, 2012
    I am base in UK and live in this country for 42 years. I am also Mauritian by birth have dual nationality. Currently I am retired , pay my tax in UK through renting property here. I would like to know whether it is in my interest to start a Holding Company in uk or other part of the world. I am considering to buy a property in Mauritius and Morocco. Please advise me
  • Elaine said on February 22, 2012
    I am base in malaysia and i would like to know how to start a holding company here ? And what is the min requirement of being a holding company ?
  • Amanda said on March 15, 2012
    RSA KZN Vryheid. I have one active and one dormant CC what would the benefit be of forming a holding company and transferring some of my business from the active cc to the dormant cc
  • James said on April 26, 2012
    Hi, i'm from the Philippines. I have some questions regarding holding companies. If you do not own 80% of another corporation, is there double taxation on dividends? Say i own 50% of a company, it pays dividends to the holdings company, and the holdings company pays dividends to its shareholders right?

    I could have myself as the shareholder of the subsidiary companies but i think for future investment sakes it would be better to form a holdings company and own the shares with that. Or are there disadvantages? In the holdings company I would either have 60% share or 95%. Does that make a difference other than the amount of dividends that will be paid? Thank you!
  • Solite said on July 4, 2012
    Ortigas, Pasig, Philippines. What are the requirement in establishing holding company in the Philippines? How is it being registered?
  • Kevin said on December 26, 2012
    NY 15 yr business experience NY, NYC USA. I want to start a holding company in order to umbrella 3 companies I have already started, how do I go about this process. Would I be able to purchase minority stock shares in both public and private companies, as well as use private equity investments such as LBOs to acquire private companies & start-ups in diverse industries? While investing in stocks of public companies to grow the holding company would I be able to buy into franchises? Should I look to private equity firms for start up financing? How would investing in a rental properties work under this scenario? How will I file tax for the holding company? And what are some good books on starting a holding company? Are there any special licenses necessary to run or own a holding company ?
  • chris swift said on December 28, 2012
    Pub manager. Uk. England. Want to run a few pubs. Can u help me find out how i go about doing this. Thanks.
  • Raj Panjabi said on February 3, 2013
    Los Angeles, CA (USA), I want to find if I can form a Holding Company in a different state to where the HQ or its operating business will be located. My second question is if I can form Holding company in UK while the operating business are located in USA. Will await your reply.
  • Jamie Doherty said on February 11, 2013
    Waterloo, ontario. Canada. I specialize in corporate tax saving strategies by helping the shareholders pull corp. dollars out tax free. I want to be able to show how to do this using a holding company, but I don't know if this site is the best way? Can you advise me if you have any ideas or another way that I can help people with good advice?
  • Stanford Mbengane said on April 23, 2013
    When we refer asset or stock held by a holding company on behalf of its subsidiary, do we refer to debts too?
  • Phindile said on May 22, 2013
    how can i go about registering a holding company in south africa? can i register a PTY Ltd as HOLDING COMPANY with CC under it?
  • RS said on June 2, 2013
    I am a canadian resident who invests in a lot of otcbb stocks and in canada the stock certificates can be hard to deposit....so i'm wondering if I could start a holdings company in the usa and purchase theses stocks through the holdings company and then delosit them in the usa. My only concern is that I may end up paying double the taxes to get the cash out....corporate tax on the capital gains and then more tax if I pull a dividend. Does anyone know anything about this that can offer advice?
  • Felicia said on June 23, 2013
    I am in Vancouver, BC, Canada., I would like to form a holding company for a few of my corporations. I would like to know what paper work is needed, or if possible a step by step of how to began the process. Thank you
  • Antwan said on July 6, 2013
    I am an entrepreneur from Grand Rapids, MI USA. I plan to start a holding company for the insurance franchises I plan to own. I have a few questions. First, With my holding company serving as the parent company to the insurance franchises will I have access to their "float" (investible premiums) secondly if so what should I expect for the quarterly or annual amount to look like since this is the capital I am seeking to use for my purchases of minority-majority stakes in publicly traded companies. Lastly what kind of loans can my holding company pursue if we were to finance our own business? Please respond to me at my email address Antwan_alk@yahoo.com
  • Leverage masvondo said on July 24, 2013
    hie, I am in Zimbabwe, I want to know the if one person can form a holding company? what paperwork is needed in forming one. and if possible a step by step process of how to start.
  • darios calatrava said on August 4, 2013
    manila, philippines. Right now I have 25 million pesos in my time deposit, is it possible and enough to use this money as starting capital to finance and form a pure holding company?
  • Alternative Countries said on September 20, 2013
    I currently in the USA, had help establish Holding and LLC companies in Singapore, Switzerland and Germany, contact me if interested.
  • Senzo said on January 29, 2014
    Hi I am based in South Africa. I am currently a sole member of the cc, I want to establish a holding company that will have shares in multiple cc's in my area. and Buy raw material for them and they will pay admin fee in the end how will that benefit the Holding company and what are tax implications
  • bongani fakude said on May 18, 2014
    How do I register a holding company in south Africa? What R the benefits and advantages of owning one?
  • Jen said on July 3, 2014
    hi, I'm Jen from Philippines my Boss is planning to start up a holding company? what are the documents needed? Thanks
  • Ronald said on July 12, 2014
    Hi @Jen, I understand your boss is planning to start up a holding company. Can I have your email ad or PM me. I have an inquiry. Thank you
  • Ronald said on July 13, 2014
    Hi @Jen, I saw your message dated 7/3/2014 with regard to the plan of your boss to start a holding company. Can I have your email ad? Mine is sanchez_rb@yahoo.com. Thanks.
  • Bukeka said on July 29, 2014
    Where can I get help starting my own rail manufacturing company from the beginning? I am in East London, South Africa. Thank you for your assistance.
  • Roy Thorn said on October 20, 2014
    Interested in Holding Company - Setup and Operations.
  • somi said on December 19, 2014
    good day, I have an events management company that I HAVE REGISTERD ALREADY , but I have other business interest that I want to do as well , so I was thinking of having a holding company as the mother of all my other companies. but my question is how do I do that ? thanking you in advance
  • Linda Hunnicutt said on January 23, 2015
    My husband & I own (80-20)a small company and are purchasing property. Can I create a holding company LLC in our children's name to put this small company under?
  • Dagny Sueno said on August 24, 2015
    Hi. This article was very helpful. I am from Davao City Philippines. May I know the paper work needed to for a holding company. Thank you!
  • Roelf Hoeksema said on April 19, 2016
    Hi,I am based in South Africa but have a British Passport.I would like to setup a Holding Company in the UK that will be managing other Small Companies/Assists registered in South Africa.How do I go about doing this.Note that the SA companies are not setup yet and the plan is to start with one.Then as the Company 1 evolve company 2 will be created for further initiatives.

    Comment

    (All the above fields are required.)