Holding company: Difference between revisions

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{{Business administration}}
 
A '''holding company''' is a [[company (law)|company]] that owns other companies'the [[Shares outstanding|outstanding stock]] of other companies. A holding company usually does not produce goods or services itself. rather, itsIts purpose is to own shares of other companies to form a [[corporate group]]. However, in many jurisdictions ofaround the world, holding companies are usually termed ascalled parent companies, whowhich, besides holding stock in other companies, can conduct trade and other business activities itselfthemselves. Holding companies allow the reduction ofreduce [[risk]] for the owners, and can allowpermit the ownership and control of a number of different companies.
 
Holding companies are also created to hold assets, such as IP[[intellectual andproperty]] or trade secrets, that are protected from the operation company. ThisThat creates a smaller risk when it comes to litigation.
 
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.
 
Sometimes, a company intended to be a pure holding company identifies itself as such by adding "Holding" or "Holdings" to its name.
 
==United States==