PRESENTATION OUTLINE
A holding company is a company which holds a subsidiary compay.
A major corporation might structure itself as a holding company with one subsidiary to own its brand name and trademarks, another to own its real estate, another to own its equipment and others to operate each franchise.
Also, a holding compay is a special type o business, that not perform any kind of specialized work and products.
How a holding company makes money?
The holding company may simply make money by providing a capital source to the subsidiaries, which the subsidiaries then pay back to the holding company.
One example of an arrangement where the holding company manages other companies under it's, so-called, protective umbrella.
Sometimes, the holding company may own or maintain the rights to certain types of intellectual property or technology. The subsidiaries then "license" that intellectual property or technology, and pay the holding company a "fee" to do so.
Advantages and disadvantages
1. The holding company generally produces no products or services and is simply a vehicle for owning shares of other companies.
2. Another benefit is the reduced risk exposure. The only risk the holding company has is the capital invested.
3. The holding company also benefits from the subsidiary's goodwill and reputation, while being sheltered from risks faced by the subsidiary in the case of legal issues, tax liabilities and lawsuits.
4. Structuring a holding company makes sense from a number of perspectives. When raising capital a larger holding company has more diversity of assets than an individual company, which makes raising capital easier.
5. The holding company can set corporate policies over all subsidiaries without interfering with individual management of the subsidiaries.
1. If less than 80% of the stock is owned by the parent company, the holding company paysnumerous taxes on the federal, state, as well as local levels
2. A holding company can be required to dissolve more easily as contrasted to a single merger operation.
3. Structuring a holding company is less expensive and provides a legally easier way of gaining control over a number of different companies.
