Explained: What is a Holding Company / How does it work? | #businesstips #holdingcompany

at shorts chartered accountants we  regularly advise on the benefits of   creating a group structure via  the use of a holding company   but what actually is a holding company and how  does it work a holding company is an entity that   owns a controlling interest in another company  or companies which are known as subsidiaries   it is normally set up to hold only assets and  investments and does not normally trade in goods   or services its main purpose is to form a  corporate group a typical corporate group   structure looks like this the limited company  at the top of the structure is the holding   company which is owned by the company shareholders  beneath the holding company are the subsidiaries   these are normally the trading  companies that generate a profit   and ultimately provide the return on investment  for the holding company and its shareholders   so why do business owners set up holding companies   the main benefits of a holding company are asset  protection protection from losses and reduced risk   in a group structure the holding company can  hold valuable assets such as cash property ip   or plant and machinery which would otherwise  have been owned by the trading subsidiary   this means the assets held in the holding  company should be protected from creditors   and other associated risks faced by the  trading subsidiaries in addition to this   if a company undertakes multiple trades splitting  these out into separate subsidiary companies   under common control of a holding company  can minimize the risk to the overall group   should one of these trades  perform poorly or become insolvent   aside from asset protection there are also some  tax benefits associated with a group structure   dividends can generally pass between  subsidiary companies in the holding company   without incurring any tax charges and assets  can be transferred around the group tax-free   furthermore there is usually no tax to pay in a  holding company if it sells a trading subsidiary   providing it holds at least  10 percent of the shares   you may be wondering are there tax  implications of inserting a holding company   providing the transaction is designed  and implemented correctly the insertion   of a holding company and transfer of assets can  normally be achieved without any tax liabilities   so if you think you might benefit from  setting up a corporate group structure   our team is happy to advise and assist with the  setup we have lots of resources and guides on our   website which you can find below alternatively  drop us an email and book a free consultation

Channel: Shorts Chartered Accountants

Views: 7,003

Keywords: holding company, corporate group, subsidiary companies

Id: FH9xNzdGoag

Length: 2min 45sec (165 seconds)

Published: Mon Aug 01 2022