Benefits of a Holding Company
The holding company-subsidiary company corporate structure is extremely popular all across the world. All large companies serve as holding companies. For instance, Apple Inc. is a holding company which is registered in the United States. Apple has several subsidiaries all across the world. Companies like Apple China and Apple Russia are registered in their respective countries.
This structure is used by all multinational companies in the world. They have subsidiary companies which conduct business in different parts of the globe and then send their profits back to the holding corporation. This structure has become popular because there are several tax and operational benefits that accrue as a result of this structure.
In this article, we will have a closer look at some of the main benefits that are associated with having a holding company.
What is a Holding Company?
A holding corporation is a parent corporation. This means that the holding corporation owns majority shares in other companies. As a result, the holding company can appoint the board of directors of the subsidiary company. This means that the holding corporation is in complete control of the policies and workings of the subsidiary company.
Also, since the holding company owns majority stock in the operations of the subsidiary company, it can receive the profits from transfer it to the parent company. Based on the needs of the shareholders, the profits can either be retained in the subsidiary company or they can be transferred using the holding company. Thus, the holding company structure provides flexibility to the shareholders.
Advantages of a Holding Company
Disadvantages of a Holding Company
To sum it up, the holding company structure has several benefits. However, a lot of these benefits only accrue to companies that have a significant turnover. Hence, this strategy may not be applicable to smaller companies.
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