A holding company is a company that owns stock from other companies. Such a company often does not engage in any type of production operations, but simply owns shares of stock from other companies. Many businesses create this type of company because there are various tax consolidation and dividend benefits associated with holding companies.
Some holding companies may engage in a variety of enterprises, with stock ownership being simply another branch or arm of the company. Other business forms may be considered holdings companies (such as Family Limited Partnerships, which often hold property from within a family line).
A pure holding company is a company that only engages in stocks and securities objectives from the outset of its creation. They do not provide any services or produce and types of goods. Pure holding companies are often identifiable through the words "Holding" or "Holdings" in its company name (for instance, J&J Holdings Company).
Holding companies have many distinct advantages as a business form. For instance, they have benefits like:
- Less risk (due to minimal or zero production and manufacturing activities)
- Allows the company to control other business organizations
- Helps to focus the company’s aims on only a few select projects
- Certain tax advantages for qualifying companies
Thus, holding companies can be useful for accomplishing certain business goals. On the other hand, they can be quite limited for organizations that seek to accomplish a broad range of business goals.
In such cases, the company might want to choose a different form. Consultation with a business or legal professional can help the company choose the right options for their aims. Disputes over stock ownership can sometimes arise with holding companies and their affiliates.
Holding companies are very specific types of business forms. You may wish to hire a business lawyer if you need help or consultation regarding any business matters. Your attorney can help you understand how the laws in your area work, which can help your organization avoid legal issues in the future. Also, if you need to file a lawsuit, your attorney can provide you with legal representation during the process.