Why to use a holding company with a subsidiary?
Discussion
All,
I have heard that when some people set up a new business they use a holding company with another subsidiary company underneath that holding conducting the actual business (eg recruitment consultant).
Does this make sense or would it more sensible/normal to just set up the actual business/company (eg recruitment consultant) itself?
Many thanks
I have heard that when some people set up a new business they use a holding company with another subsidiary company underneath that holding conducting the actual business (eg recruitment consultant).
Does this make sense or would it more sensible/normal to just set up the actual business/company (eg recruitment consultant) itself?
Many thanks
To be honest, it is not that common. The vast bulk of registered limited companies are stand alone.
I cannot see any real benefits in setting up a trading company with its shares help by a holding company.
It would appear to me to just make the admin of the company more complicated and expensive.
I cannot see any real benefits in setting up a trading company with its shares help by a holding company.
It would appear to me to just make the admin of the company more complicated and expensive.
There are many reasons why larger operations divide their trading activities up into separate subsidiaries - often with a holding company at the top of the pyramid.
These are usually large conglomoerates who want to ensure that each trading entity prepares its own figures and has its own limited libility away from the other trading activities.
There is some difference in taxation between these types of set-ups and a straightforward single limited company but I wouldn't think that massive amounts of taxation would be saved. I would think that the legal and business reasons for setting up a "group" are more important than tax considerations.
These are usually large conglomoerates who want to ensure that each trading entity prepares its own figures and has its own limited libility away from the other trading activities.
There is some difference in taxation between these types of set-ups and a straightforward single limited company but I wouldn't think that massive amounts of taxation would be saved. I would think that the legal and business reasons for setting up a "group" are more important than tax considerations.
Another reason is the isolation of risk. If there are several different unincorporated businesses within 1 Ltd Liability company these can split up of 'hived down' into separate Ltd Liabilit companies with a hold co. above. The advantage being that should one of those new Ltd Liability companies (operating one of the separate businesses) run into difficulty it need not impact on the others.
There are a number of reasons why different businesses / companies are structured in certain ways, increasingly this is becoming tax driven.
There are a number of reasons why different businesses / companies are structured in certain ways, increasingly this is becoming tax driven.
I would say it is LESS likely that tax is the reason (unless you are trying to make use of some obscure offshore device which might be marginally legal).
One of the disadvantages of "groups" of companies is that the small company tax threshold gets divided up proportionately between the individual companies in the group.
One of the disadvantages of "groups" of companies is that the small company tax threshold gets divided up proportionately between the individual companies in the group.
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