Holding Company

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Definition of 'Holding Company'

A holding company is a company that owns enough voting stock in other companies to control their management and policies. Holding companies often own a controlling interest in several different companies, and they may also own non-controlling interests in other companies. Holding companies are often used to manage a group of related companies, or to provide financial or administrative services to their subsidiaries.

There are several reasons why a company might choose to become a holding company. One reason is to reduce taxes. By holding companies, the parent company can avoid double taxation on its income. Another reason is to insulate the parent company from the risks of its subsidiaries. If a subsidiary company goes bankrupt, the parent company may not be liable for its debts. Holding companies can also be used to consolidate management and operations of a group of companies, and to facilitate the transfer of assets between companies.

Holding companies are not without their disadvantages. One disadvantage is that they can be more complex to manage than other types of companies. Another disadvantage is that they may be subject to more regulatory scrutiny. Holding companies can also be used to avoid taxes, which may be seen as unfair by other companies.

Despite these disadvantages, holding companies are a common business structure. They are used by companies of all sizes, in all industries. Holding companies can be a valuable tool for managing a group of related companies, and for reducing taxes and risk.

Here are some additional details about holding companies:

* Holding companies are not required to have any employees or assets. They can simply be a legal entity that owns shares in other companies.
* Holding companies can be publicly traded or privately held.
* Holding companies can be used to invest in a variety of different industries.
* Holding companies can be used to manage a family's wealth.
* Holding companies can be used to structure mergers and acquisitions.

If you are considering forming a holding company, it is important to consult with an experienced business attorney. A business attorney can help you understand the advantages and disadvantages of holding companies, and can help you structure your holding company in the most tax-efficient manner.

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