Establish Holding Company - Know its Purpose

Post date: Oct 20, 2020 10:6:5 AM

A holding company usually does not manufacture or sell any service or product and does not conduct business operations but it holds stock and membership interests in various different companies.

The main purpose to establish holding company lies in the fact of how it can be used. A holding company structure is usually popular with large businesses and enterprises where a company manufactures various types of goods like healthcare, skincare, baby care, hair care products. Instead of structuring various divisions within the company it can be structured with a holding company and other subsidiaries. This makes the business model simple generating channelized profits. Each unit of business is a different subsidiary and the holding company holds an interest to control.

Incorporate holding company- Learn about its advantages.

Advantages:

1. Protection of Liabilities: Restructuring the business into various subsidiaries places the debt of a particular subsidiary onto itself and the whole business would never suffer a setback for an undesirable financial crisis.

2. Asset control and lower costs: A holding company has a controlling interest over all subsidiaries but does not need to own every share and interests. Hence, a holding company can get control of another company and its assets at a reduced cost.

3. Lower interest rates for debts: A holding company can procure loans at a lower cost than an operating company and channelize funds to the subsidiaries in case of credit debt.

4. Day to day management is not required: A holding company does not need cumbersome management teams because each subsidiary has its own management.

Thus holding companies in UK are becoming increasingly popular and are one of the rock-solid foundations for running successful big businesses.