Do I Need A Holding Company?
A question that I'm often asked by business owners is "Do I need a Holding Company or is my Operating Company enough?" There are a number of potential opportunities that a Holdco, that owns shares in your Opco, that can offer business owners a huge advantage over just having an Opco. I've also seen business owners that have a Holdco in place but still keep surplus cash or investments in their Opco, largely because they've never been properly explained about the purpose of having a Holdco!
We'll take you through a few scenarios where a Holdco can represent tremendous opportunities to the business owner.*
What's the Difference Between an Operating Company and a Holding Company?
A Holding company and Operating Companies are both registered incorporated entities. The main difference is that a Holdco doesn't have active business activities (ie revenue for sales, expenses, payroll etc). It's a company used mostly for tax purposes and creditor protection.
So Why Might You Need a Holding Company?
Here are a number of reasons: