As international trade grows and globalisation increases, a rising number of enterprises are implementing sophisticated legal structures that include holding companies. But what precisely is a holding company, when is it needed, and what type of holding company do you require?
Holding Company
If you register holding company, it is a legal entity that owns and oversees other businesses that carry out operations. The holding company does not normally conduct activities; rather, its principal function is to own shares or assets in other firms that do. Simply defined, a holding company “holds” your assets and owns shares of running businesses that carry out day-to-day operations.
When Do You Need a Holding Company?
A holding company becomes useful when your firm expands beyond a single line of operation or a simple ownership structure. If you already have many firms or business directions, are looking for investors or financing, or are thinking about entering overseas markets, you might consider forming a holding company. This choice will not only assist to streamline corporate management, but it will also give room for future growth.
A holding structure is also an excellent tool for legal tax optimisation, as it provides for the separation of operational activities and ownership of critical assets. This, in turn, protects the company’s assets from financial risks, litigation, creditor claims, and unjust measures taken by counterparties or partners. With this technique, even if one of the subsidiaries fails, the principal assets remain safe and cannot be seized.
A holding company expands commercial options, particularly through the ability to re-distribute and reinvest funds inside the group. Simultaneously, the establishment of a holding company simplifies and optimises the tax burden when selling a firm, as well as the process of transferring the business to heirs, eliminating onerous legal procedures in the future.
Today, you asked yourself numerous questions and, we hope, obtained answers that you had not considered previously. Finally, you’ve determined whether you need a holding structure at all and where it should be built specifically for you.
When you register holding company, it is a significant step for any business structure, thus this decision should be carefully addressed. To deliver value, a holding company must be supported by a dependable legal counsel, because ignorance of the law is no defence – knowing the law is your biggest advantage.
TBA & Associates offers tax-efficient arrangements to enable cross-border transactions and specialises in custom wealth preservation solutions.
