What is a holding company?

One of the popular ways of starting a business is to register a holding company. What are the advantages of establishing this company and how does one open it? Let’s find out.

How It Operates?

First of all, you should know that a holding company does not carry out any operations and can only own/manage assets or receive income from dividends of other companies.

Assets owned and managed by a holding company include:

• real estate;
• shares of other companies;
• property parts in partnerships;
• trademarks;
• hedge funds;
• patents.

If a holding company owns a controlling stake in other companies, it is called a parent company. Other companies like these are called subsidiaries or daughter companies.

Participation in a group of holding companies provides one with an opportunity to take advantage of special benefits; these benefits would be unavailable for individuals or companies operating as separate legal entities.

Key Advantages

Those seeking to set up a holding company should keep in mind that this business entity has the expertise that can be used by subsidiary companies to improve their efficiency. At the same time, by providing services to major clients, subsidiaries can increase sales of holding companies.

When it comes to registering a holding company in England, the general financial stability of a holding can be used to create a more advantageous funding environment. Also, subsidiary companies operating in one industry can combine their purchasing power to obtain favourable prices from suppliers and improve lending terms.

A holding can implement major projects by combining the financial resources of a parent company and its subsidiaries.

Corporate Management

Setting up a company in Hong Kong or registering a holding company in Luxembourg provides one with an opportunity to control more enterprises with less capital. By buying at least 51% of a company’s shares, a holding company can acquire control over it (sometimes, buying only 25% of shares is enough).

Hence, setting up a holding company does not require buying 100% of shares and provides one with an opportunity to control more companies without significant investments.

If you are planning to start your own business, then registering a holding company in Switzerland can be an excellent opportunity to expand your activities without exposing yourself to any serious risks.

Mitigating Risks

Those interested in setting up a holding company in Singapore (or other countries) should keep in mind that subsidiaries are protected from the risks that other companies may be exposed to. By winning a case against a daughter company, a plaintiff cannot influence other companies in a holding.

If a subsidiary company does not receive any guarantees from a holding company, the latter shall bear no liability.

If a daughter company takes risks or goes bankrupt, the losses stemming from it will not impact a holding company. In this case, a holding company may simply sell its shares to a daughter company.

Tax Cuts

When opening a holding company in Malta, you can compensate for the losses incurred by your subsidiaries by using profits earned by other daughter companies. To be eligible for this, your holding company must submit a general tax return.

The entire group of holding companies can be eligible for tax cuts. The dividends paid to a holding company by daughter companies must be exempt from income tax; otherwise, the tax rate will be minimal.

These dividends can be paid to ultimate beneficiaries or used as investment in other daughter companies.