What is a holding company?

What is a holding company?

One of the popular ideas for starting a business is to register a holding company.

What are the main features and advantages of this company and how to open it, we will consider in our article.

How it operates?

First of all, you should know that holding company does not carry out any operations or actions. It is engaged in owning and managing assets and receives income from dividends of other companies.

The assets of the holding company can be the following:

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

If the holding company owns a controlling interest in other companies, then it is called the Parent Company, and other similar companies are called Subsidiary Companies or Daughter Companies.

Participation in a group of holding companies will give you an opportunity to take an advantage of special benefits, which you cannot use operating as a separate legal entity.

Key advantages

Those who want to set up a holding company should know that this business entity have specialized knowledge that can be used by subsidiary companies to improve their efficiency. At the same time, one subsidiary can deal with large customers that will benefit other holding companies and increase their sales.

In the case of registering a holding company in England the general financial stability of the holding group can be used to create 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 conditions.

The entire holding can conduct major projects through combining the financial resources of the parent company and its daughter companies.

Corporate management

Setting up a company in Hong Kong or registering a holding company in Luxembourg allows you to control more enterprises with less capital. By buying at least 51% of the company shares the holding company is entitled to control it.

In certain cases, it will be enough to buy only 25% of shares if many people own the property.

So, setting up a holding company does not require the buying of 100% corporation shares and gives an opportunity to control more companies with less investment.

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 any serious risks.

Risk mitigation

Those who are intended to set up a holding company in Singapore or in other countries should also know that daughter companies are protected from risks arising in other companies. If the complainant wins the case against one daughter company, then it cannot influence the other companies.

If a subsidiary company does not receive guarantees from the holding company, then the holding company will have no liability.

If a daughter company take risks, fails, or becomes bankrupt, the losses will not have an impact on the holding company. In this case, the holding company can just sell its shares to a daughter company.

Tax relief

When opening a holding company in Malta, you can compensate for the losses incurred in subsidiaries using the profits of other subsidiary companies. For this, your holding company should submit a general tax return.

The entire group of holding companies is subject to low taxes. The dividends paid to a holding company by daughter companies should be completely exempt from income tax, or the tax rate should be minimal.

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

How to open a holding company?

If you decide to register a holding company in South Africa or in another jurisdiction, then YB Case experts will provide you with consulting and legal support services and help you to prepare all the necessary documents.

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