A holding company is a corporation that limits its business to the ownership of stocks in other companies. In addition, it can perform supervision or management functions for these companies. A holding company does not produce goods or services itself.
Why use a holding company?
There are a number of reasons for using a holding company.
First of all, holding companies achieve the reduction of risk for the ultimate owners of the assets. This is especially the case, when holding companies are located in countries with strong asset protection laws.
In addition, a holding company can help centralize the ownership and control of a number of different companies. For example, you could transfer the shares of a holding company to transfer a large number underlying assets, instead of going through the procedures of buying each asset individually. This characteristic can also be useful when transferring assets to the next generation.
And finally, a strategically located holding company can help reduce your tax burden.