The holding company is one of the most attractive legal forms under which large enterprises can own and control businesses in other countries.
Holdings can be found in nearly every country around the world thanks to the fact that it is easy and simple to register a holding company, in most cases the limited liability company is the preferred choice of investors when opening such an entity. When it comes to how to open a private limited liability company, the requirements depend on the legislation, however, this business form is available for incorporation worldwide even if it goes by other names.
Back to the advantages of opening a holding company, we present some of them below.
It can be used as an asset protection tool
One of the most important advantages of the holding company is that it can be used to pool together the assets of several companies. Among these, equipment, real estate property and even intellectual property rights are the most common valuable assets held by holdings.
The holding company is efficient when it comes to the usual risks incurred by subsidiaries, such as insolvency. In this case, even if the holding company can lose money, it will not become liable for the subsidiary’s responsibilities.
Enhanced control over the subsidiaries
One of the main reasons to open a holding company is the high degree of control it holds over one or more subsidiaries. This happens because the other companies fall under the administration of the holding company’s management and thus the decision-making process rests on the central company.
One of the best examples in this sense is related to financing which is easier to obtain as part of a consortium rather than as a single company.
The holding company is also an excellent tax minimization tool because it can be set up as a group and reduce the taxes paid by all the companies in its portfolio. It can also benefit from participation regimes available in most European countries, but also from double taxation treaties. When it comes to double tax treaties, the holding company can be compared to a branch office, however, the requirements and procedure to set up a branch are quite different.
The holding company has many advantages and depending on the country in which is set up, the benefits can be different. However, in most cases, the holding company is used for tax and risk reduction purposes.