holding company

how it works?

The term holding company comes from the fact that the business has one task - to “hold” their investments.

A holding company is a special type of business that doesn’t do anything itself.

Instead, it owns investments, such as stocks, bonds, mutual funds, gold, silver, real estate, art, patents, copyrights, licenses, private businesses, or virtually anything of value.

In other words...

The main task of holding company is executive oversight and / or passive investing, depending upon our corporate strategy.

Holding company task is to put the money to work and determine if management is doing a good job. If the company own enough stock to control an investment, it can fire the managers and replace them at our own discretion.

how it makes money?

For investors, a holding company provides the ability to make investments in a wide range of assets, including taking minority stakes in businesses.

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 manage 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 subsidiares then "license" that intellectual property or technology and pay the holding company a "fee" to do so.

advantages of holding company

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 risk 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 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.

disadvantages of holding company

1. If less than 80% of the stock is wned by the parent company, the holding company pay numerous 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...

...however...

...due to the ease and relative informality and informational filing requirements, required of holding companies, the government has discretion regarding the use of "antitrust" laws to force the closure of holding companies.

The biggest and well- known holding companies

examples of holding companies

• Allegheny
• Loews
• Berkshire Hathaway
• Cascade Investment
• 7D International

let's concentrate on one exaple

7d International

7D International holding company, located in Czech Republic, 7D provides almost full service in consulting and contracting on many diverse fields.

They market participation is ranked in vaste industrial, infrastructure and select commercial projects for public and provate customers in five continents.

Strategic goal for 7D International holding company is to become a worldwide leader among global companies by entering new markets, diversifying business activities and ensuring the security of services.

One of the 7D international’s great advantages is a developing ability in every industry simultaneously and tirelessly. This predetermines the strategies of key areas.

so, would you like to set up your own holding company?