BY THOMAS KADING
Does your business need a Holding Company? olding companies are often used by business owners, entrepreneurs, and businesses to hold an interest in another company or asset. Often business owners wonder if a holding company is something they need for their business. Holding companies can provide liability protection, consolidate income for lending purposes, support multiple subsidiaries and centralize operations management. Disadvantages to holding companies include complex legal documentation, additional tax filing requirements and additional ongoing costs. Everyone’s situation is different, so how the benefits and disadvantages affect each business owner is unique. In the following paragraphs, we consider some of the issues that may affect your decision as to whether to form a holding company.
Thomas Kading Attorney at Fargo Patent & Business Law, PLLC
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JANUARY 2022
Josiah Kopp
What is a Holding Company? First off, a holding company is simply an entity that owns other companies and assets. For example, a holding company might be a limited liability company (LLC) that a business owner owns. A holding company might own 100% of another LLC that owns a retail store, restaurant, or some other business. A holding company LLC could also own intellectual property, such as a trademark or patent. A holding company could own many different entities and many different assets. For example, a holding company could own an interest in ten different companies and license the intellectual property the holding company owns to each of the ten different companies.
One common way a holding company can be used is to invest in real estate. For example, a real estate investor might own many different rental properties, each of which is owned in a separate LLC. The real estate investor could set up a holding company that owns each of the separate LLCs. As a result the real estate investor would personally own one LLC (the holding company) and the holding company would own subsidiary LLC entities which own real estate.
Lending Benefits to a Holding Company One distinct benefit a holding company provides to a business owner is the consolidation of income from different