A holding company is a company that owns shares in other companies in a way that enables it to control the decisions and policies of those companies. In other words, a holding company is the top level in a hierarchy of companies.
A holding company can have one of several legal forms and, depending on the legal system and corporate purpose, it can be a corporation, a limited liability company or a limited partnership. A holding company is not required to own 100% of the shares in the subsidiary - the actual percentage required is determined on a case-by-case basis, but the minimum is most often 50% + 1 share, i.e. H. the majority of the shares. In some jurisdictions, the percentage of shares in a holding company can affect tax practices. For example, in the United States, a holding company must own 80% of the shares in its subsidiary to receive tax-free dividends and other tax benefits.
A holding company offers some advantage in that it is protected from losses. So if one of the companies in which the holding company has shares goes bankrupt, that loss does not affect the holding company. Holding companies also offer you the option to maintain your confidentiality as authority and decision-making are centralized.
Functions of a holding company
The main function of a holding company is to minimize risk by dividing assets among different subsidiaries. This means that it is not founded (as is usually the case) with the aim of producing and / or selling goods and services, but rather to structure a group of companies in a way that minimizes risk.
This is achieved by limiting the scope of liability for the holding company itself and for each of its subsidiaries. For example, one subsidiary might own real estate on behalf of the holding company, another might manage intellectual property, a third might manage branding, etc. Thus, the holding company's various assets are divided and if one of the subsidiaries fails and goes bankrupt, neither does the holding nor their other structural components endangered, as these are not held liable for losses of subsidiaries. The main function of a holding company is therefore to direct the actions of its subsidiaries.
http://www.confiduss.com/en/services/incorporation/purpose/holding/