Holding Company

Multinational companies may decide to establish a holding company for a range of reasons. For example, a holding company may be an efficient way to manage a group of subsidiaries in a particular region by centralizing financing, licensing and management activities.
A holding company also may provide tax efficiencies in relation to withholding taxes on dividends and taxes on capital gains.

Choosing the appropriate location for a holding company is a complex procedure—involving consideration of business, economic, logistical and operational requirements. The tax attributes of the location are also a relevant factor.

In practice, companies are frequently owned by other companies. Intertwined ownership structures can make it difficult to understand how a company operates, what parts of it are regulated by which government entities, and what part may be of particular interest in a news story. There are parent companies, holding companies, and shell companies, to name a few.

A holding company is a corporation that owns stock in other companies. A pure holding company is established only to hold shares in other companies. A large holding company can control many individual companies.

A shell company is a business entity that is not actively engaged in business and has no or few assets. Although some have been abused in money laundering and tax avoidance schemes, shell companies have legitimate uses. For example, publicly traded shell companies are used in reverse mergers, when a private company buys the shell, allowing it to be traded on the market without going through the required initial public offering.