A holding company is a company whose primary business is holding a controlling interest in the securities of other companies rather than producing goods or services itself. It creates a corporate group by owning stock in multiple subsidiary companies, which can reduce risk for shareholders since each subsidiary can be held separately within a tiered structure. Holding companies are also created to hold assets such as intellectual property or trade secrets apart from an operating company, which creates a smaller risk when it comes to litigation.
Facts
Core MechanismA holding company itself owns a controlling interest in the stock of other, operating companies rather than producing goods or services directly. This lets its owners control a group of separate businesses through one parent, contains the financial and legal risk of any one subsidiary within that subsidiary, and in the United States allows tax-free intercompany dividends once it owns at least 80 percent of a subsidiary's stock. 1 Cross-Tradition Connections
Associated With
Berkshire Hathaway, run by Warren Buffett, is the most commonly cited real-world example of a holding company, a parent structure owning controlling stakes across many independently operated businesses rather than running them directly.
Sources
1. Wikipedia, Holding Company
WikipediaWikipedia: Holding company, lead paragraphQuote, Wikipedia: Holding company, lead paragraph
A holding company is a company whose primary business is holding a controlling interest in the securities of other companies.
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