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International Holding

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what is holding company structure

2018/07/14

A holding company is a company that owns other companies’ outstanding stock. A holding company usually does not produce goods or services itself (with no eponymous consumer-facing brand at most times); rather, its purpose is to own shares of other companies to form a corporate group. However, in many jurisdiction of the world, holding companies are usually termed as parent companies who besides holding stock in other companies can conduct trade and other business activities itself. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.

Holding companies are also created to hold assets such as IP and trade secrets that are protected from the operation company. This creates a smaller risk when it comes to litigation.

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In the United States, 80% of stock, in voting and value, must be owned before tax consolidation benefits such as tax-free dividends can be claimed.[1] That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay 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 shareholders.

Sometimes a company intended to be a pure holding company identifies itself as such by adding “Holding” or “Holdings” to its name

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