A holding company owns other businesses. It usually owns all the shares in the operating company, allowing it to own valuable assets.
You can create a holding company to own the shares of your operating company. For instance, T Holdings owns 100% shares of Tom Tyres, with no operations. Understanding this difference is essential in determining the suitability of this structure.
Benefits and Functionality
A holding company is primarily used for holding investments and controlling other companies. It allows single ownership of businesses while minimizing risks.
An operating company generates revenue, creates jobs, and focuses on day-to-day operations. A HOLDCO can limit liability by separating assets for operational use.
Considerations and Structure Types
Legal requirements must be followed to avoid financial or legal risks for the holding company and owners. Various holding company structures, such as parent companies or LLCs, cater to different business needs.