What is the holding company and what is the purpose of it?
Obviously, its some kind of legal entity.
However, Im not sure exactly the reasons why they are set up. Many large publicly traded corps have hundreds of these.
Just curious why they are set up this way...Jurisdiction, legal, tax?
Whats the main reason? Im looking for more than some texbook definition...I want to understand the practical reasons certain companies use them, and the logic behind it.
Thanks for insight.
2006-08-12 07:15:01 · 7 answers · asked by Anonymous in Business & Finance ➔ Investing
To the first answer..It still is not clear.
A company buys another...under what conditions would mgt form a holding company and when would they not.
Im a little slow on this...need it spelled out:(
thanks
2006-08-12 07:26:33 · update #1
You are right to think of jurisdiction, legal reasons and tax reasons -- all three contribute.
A holding company is a corporation that has partial or complete control over other companies.
There are several reasons why a company might want to do this -- mainly having to do with legal restrictions or limiting liability.
Limiting liabilit is an important feture. If a holding company owns two companies, then if one goes bankrupt, they have no call on the assets of the other firm.
You may notice that there are a lot of bank holding companies. This is due, in part, to the fact that different states have very different banking laws. Banks in each state are set up as separate companies to avoid conflicts. Banking laws have changed a lot since the 1980s. Prior to then, many states limited the number of banks that a company could have. Having a holding company got them around this.
Another reason for a holding company is to make it easier to have joint ventures.
2006-08-12 07:43:55 · answer #1 · answered by Ranto 7 · 3⤊ 0⤋
This Site Might Help You.
RE:
What is the purpose of a holding company?
What is the holding company and what is the purpose of it?
Obviously, its some kind of legal entity.
However, Im not sure exactly the reasons why they are set up. Many large publicly traded corps have hundreds of these.
Just curious why they are set up this way...Jurisdiction, legal,...
2015-08-13 02:33:17 · answer #2 · answered by Anderson 1 · 1⤊ 0⤋
A holding company is a company whose main purpose is to own other companies. Taranto's example of bank holding companies is a good example of why.
2006-08-12 08:13:39 · answer #3 · answered by STEVEN F 7 · 1⤊ 0⤋
I think you are confusing holding companies with either subsidiaries or special purpose entities.
The purpose of the holding company is to own multiple businesses.
2006-08-12 15:09:18 · answer #4 · answered by NC 7 · 1⤊ 0⤋
If a holding company goes bust, gets sued, gets prosecuted, the parent company can't be liable for it. So many companies set up separate holding companies to manage highly risky investments or assets Hx
2016-03-17 00:07:36 · answer #5 · answered by ? 4 · 1⤊ 0⤋
What Is A Holding
2016-11-12 08:09:46 · answer #6 · answered by ? 4 · 0⤊ 0⤋
It is a trust that is created when stockholders in various enterprises assign control of these concerns to a single company and its board of trustees, thus eliminating competition.
2006-08-12 07:23:59 · answer #7 · answered by Barkley Hound 7 · 0⤊ 0⤋
read more on investing and stocks on this site which will answer you better
2006-08-12 08:29:56 · answer #8 · answered by Anonymous · 0⤊ 0⤋