Is it common for a person to own several corporations without forming a holding corp., as the parent company?

Answer 1

Sure, but once you get a few going, an "arch" corp over the rest seems to make sense.

Answer 2

Yes, even for a small businessman, it is common to have several different corporations, without a holding company.

The reason is that if each of the individual companies are all owned by a holding company, they lose their "corporate shield" protection that may be valuable.

For example, a businessman has three firms, A, B, and C. A and B are both very successful, but C has a major accident, and the damages ( $1.2 million) are well beyond what insurance covers ($500,000) In that case, Corporation C is legally obligated to come up with the difference between insured coverage and what must be paid. ($700,000.)

If the businesses are all separate (no holding corporation), then A and B may not have their assets exposed to paying off the obligations of C. If Corporation C has minimal other assets, it can simply go out of business, leaving the assets of A and B intact.

If the 3 businesses had all been under the same holding company, the assets of A and B could be taken to satisfy the $700,000 obligation.

Answer 3

Chris,

Companies are really only structured in to groups for tax and financial reasons.

If structured correctly, there should be little or no risk of a particular liability (irrespective of the size) in one of the subsidiary companies giving rise to the winding up of the entire group.

In the event of an insolvency of one company, the shareholders are generally only liable for the amount if any which remains unpaid on their shares.

Where groups are wound up as a result of a liability within a subsidiary, it tends to happen where companies within that group have provided security (i.e. debentures, charges, mortgages etc) for loans or credit facilities provided to third parties; or where the ultimate holding company provides what's know as a parent company guarantee in respect of the obligations of a subsidiary under a particular contract.

If you have several companies, the decision to form a group should be driven primarily on tax and financial advise, not on the concern that a subsidiary may go bust (this happens everyday in large groups).

Answer 4

It is common fior various reasons. One of which is tax purposes.