Holding company: Difference between revisions

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{{Business administration}}
A '''holding company''' is a [[company (law)|company]] that owns other companies' [[Shares outstanding|outstanding stock]]. A holding company usually does not produce goods or services itself (no eponymous consumer-facing brand); rather, its purpose is to own shares of other companies to form a [[corporate group]]. Holding companies allow the reduction of [[risk]] for the owners and can allow the ownership and control of a number of different companies.
In the [[United States]], 80% of stock, in voting and value, must be owned before [[tax]] consolidation benefits such as [[Dividends received deduction|tax-free]] [[dividend]]s can be claimed.<ref>I.R.C. § 1504(a); I.R.C. § 243(a)(3).</ref> That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay [[dividend tax|taxes on dividends]] paid by Company B to its stockholders, as the payment of dividends from B to A is essentially transferring cash from one company to the other. Any other shareholders of Company B will pay the usual taxes on dividends, as they are legitimate and ordinary dividends to these [[shareholder]]s.