{"id":7581,"date":"2020-04-26T15:48:08","date_gmt":"2020-04-26T14:48:08","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=7581"},"modified":"2024-11-08T11:22:29","modified_gmt":"2024-11-08T11:22:29","slug":"benefits-holding-company","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/benefits-holding-company\/","title":{"rendered":"What are the benefits of a holding company?"},"content":{"rendered":"<p>Some businesses decide to create a group structure with a \u2018holding company\u2019 as a way of managing risk and for the purpose of tax efficiency. But what exactly is a holding company, how does it change the company structure, and what are the benefits?<\/p>\n<h3>What is a holding company?<\/h3>\n<p>A holding company is essentially a parent company that owns a controlling interest in a subsidiary company (or multiple subsidiary companies). According to <a href=\"http:\/\/www.legislation.gov.uk\/ukpga\/2006\/46\/section\/1159\" target=\"_blank\" rel=\"noopener noreferrer\" data-wpel-link=\"external\">section 1159<\/a> (1) of the Companies Act 2006, entitled &#8216;Meaning of \u201csubsidiary\u201d etc&#8217;, a holding company:<\/p>\n<p><em>(a) holds a majority of the voting rights in it, or<\/em><\/p>\n<p><em>(b) is a member of it and has the right to appoint or remove a majority of its board of directors, or<\/em><\/p>\n<p><em>(c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it\u201d<\/em><\/p>\n<p>Holding companies are often inactive in terms of trading, but sometimes they will trade themselves. Although the terms \u2018holding company\u2019 and \u2018parent company\u2019 are often used interchangeably, the latter normally implies a more active trading role than the former.<\/p>\n<h3>What are the benefits of a holding company?<\/h3>\n<p>They are normally used to \u2018hold\u2019 any important assets owned by the overall group of companies, such as intellectual property, real estate and shares in the subsidiaries. This can reduce the risk of losing key assets if one of the subsidiary companies falls into financial difficulty by ring-fencing them. Other benefits include:<\/p>\n<ul>\n<li><strong>Organisational structure<\/strong> &#8211; Bringing together disparate companies, which can be useful when acquiring other companies or creating multiple business ventures, e.g. Google created a holding company called <a href=\"https:\/\/en.wikipedia.org\/wiki\/Alphabet_Inc.\" target=\"_blank\" rel=\"noopener noreferrer\" data-wpel-link=\"external\">Alphabet Inc.<\/a> in 2015. In this scenario, a holding company can make the overall business structure clearer, which may help with investment.<\/li>\n<li><strong>Tax <\/strong>-Dividends are generally not taxed on \u2018small companies\u2019 if they pass between the subsidiary companies and the parent company (known as the dividend exemption). Furthermore, if the parent company has owned at least 10% of the shares in a subsidiary for a period of 12 consecutive months, it can then dispose of these shares without generally being liable to Capital Gains Tax (known as the substantial shareholding exemption)*.<\/li>\n<li><strong>Business sale<\/strong> &#8211; Some companies may want to sell off a certain part of their business, in which case it is possible to create several subsidiaries along with a holding company and sell one of the subsidiaries.<\/li>\n<li><strong>Shared functions and control<\/strong> &#8211; It is sometimes helpful for a parent company to orchestrate certain tasks, such as collecting sales and accounting data from the subsidiaries, managing the tax affairs of the group of companies, or handling shared assets.<\/li>\n<\/ul>\n<p><em>* There are various rules and exceptions to these tax exemptions &#8211; professional advice should always be sought.<\/em><\/p>\n<h3>How can I create a holding company?<\/h3>\n<p>Holding companies can be set up in the same way as any other private limited company is formed. However, it must have control over at least one subsidiary company to be classified as a holding company under the Companies Act 2006.<\/p>\n<p>Quality Company Formations can help you to create a holding company using one of our <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/formation-packages\/\" data-wpel-link=\"internal\">company formation packages<\/a>.<\/p>\n            <a href=\"https:\/\/www.qualitycompanyformations.co.uk\/services\/registered-office-address\/\" class=\"related related-buy\" data-wpel-link=\"internal\"><span class=\"related-title related-buy-title\">A Central London registered office - only \u00a339.00 per year <\/span><\/a>\n        \n"},"excerpt":{"rendered":"<p>Some businesses decide to create a group structure with a \u2018holding company\u2019 as a way of managing risk and for the purpose of tax efficiency. But what exactly is a holding company, how does it change the company structure, and what are the benefits? What is a holding company? A holding company is essentially a&hellip;<\/p>\n","protected":false},"author":10,"featured_media":7579,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[1231],"tags":[],"class_list":["post-7581","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company-formation","category-1231","description-off"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.5 (Yoast SEO v23.5) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What are the benefits of a holding company?<\/title>\n<meta name=\"description\" content=\"Our guide explains the purpose of a holding company, how to create one, the benefits they can provide, and why you would want to set up a holding company.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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