Investment Made In Holding Company – Advantages Of Structuring Companies Into A Holding And A Subsidiary Company
- Large capital: The financial resources of the holding and subsidiary companies can be merged and hence, the company can undertake large-scale projects to increase its profit.
- Avoidance of competition: When both the holding and subsidiary company are in the same line of business, competition between holding and subsidiary companies can be avoided.
- Secrecy: Secrecy can be maintained as the authority and decision-making are centralized which prevents adverse publicity as well.
- Risks avoided: The loss on the part of the subsidiary company won’t affect the holding company badly. The holding company can sell the stakes, and the holding company can stabilize the business.
- Effective decision-making: Since the subsidiary company is maintained as a separate entity, the holding company can take decision freely regarding any business activities.
Investment Made In Holding Company – A holding company is a company that doesn’t have any operations, activities, or other active business itself but one which holds assets in its subsidiary companies. “These assets can be shares of stock in other corporations, limited liability companies, limited partnerships, private equity funds. And hedge funds, publicly traded stocks, bonds, real estate, song rights. Furthermore, brand names, patents, trademarks, copyrights, or virtually anything else that has value”. Holding companies are often created by majority shareholders. Who has a long-term commitment to the business to manage their shareholding in group companies. Funding for a new company or a company going through a restructuring process may be difficult. Which can be ameliorated by setting up a holding company. That seeks credit from all sources and allowing it to finance. According to the needs of its needy subsidiaries which wouldn’t otherwise easily secure credit.