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Business owners are always looking for ways to protect their business’ assets. And over the years a number of strategies have been developed to help them do so. One of the most effective is dividing the business into several business entities all owned and controlled by a single holding company.
A holding company is a business entity—usually a corporation or limited liability company (LLC). Typically, a holding company doesn’t manufacture anything, sell any products or services, or conduct any other business operations. Rather, holding companies hold the controlling stock in other companies.
Although a holding company owns the assets of other companies, it often maintains only oversight capacities. So, while it may oversee the company’s management decisions, it does not actively participate in running a business’s day-to-day operations of these subsidiaries.
A holding company is also sometimes called an “umbrella” or parent company.
The holding company can own 100% of the subsidiary, or it can own just enough stock or membership interests to control the subsidiary. Having control means it has enough stock or membership interests to ensure that a vote of owners will go its way. This can be 51%, or where there are many owners, it can be a much lower percentage.
Each subsidiary has its own management who run the day-to-day business. The holding company’s management is responsible for overseeing how the subsidiaries are run. They can elect and remove corporate directors or LLC managers, and can make major policy decisions like deciding to merge or dissolve. The people running the holding company do not participate in the operating companies’ day-to-day decision making.

A holding company typically exists for the sole purpose of controlling other companies. Holding companies may also own property, such as real estate, patents, trademarks, stocks, and other assets.
This structure serves to limit the financial and legal liability exposure of the holding company (and of its various subsidiaries). It may also depress a corporation’s overall tax liability by strategically basing certain parts of its business in jurisdictions that have lower tax rates.
Businesses that are completely owned by a holding company are referred to as “wholly-owned subsidiaries.” Although a holding company can hire and fire managers of the companies it owns, those managers are ultimately responsible for their own operations.
How is a holding company financed?
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The holding company’s management is also responsible for deciding where to invest its money. The holding company can obtain the funds to make its investments by selling equity interests in itself or its subsidiaries or by borrowing. It can also earn revenue from payments it receives from its subsidiaries in the form of dividends, distributions, interest payments, rents, and payments for back-office functions it may provide.
Types of Holding Companies
Holding companies fall into different categories, depending on their business operations. Some only exist to hold a single subsidiary, while others may be engaged in other business operations. The different types of holding companies are explained below:

• Pure Holding Companies: A pure holding company is one that only exists as a vehicle for ownership of other firms. These companies do not participate in any other type of business.
• Mixed Holding Company: A mixed holding company is one that has its own business operations, in addition to managing its subsidiaries. Another word for this is a holding-operating company.
• Immediate: An immediate holding company is a company that owns other companies, but is itself owned by another entity. In short, these are holding companies that are owned by another holding company.
• Intermediate: Similar to an immediate holding company, these are holding companies that are also subsidiaries of a larger corporation.
Ayaran Holding gathered this.