Before we dive much into the topic, let us understand the term “holding“. The simple definition of the word “holding” means being in possession of something or a stock.
A holding company is a company, whose main purpose is to own a share in a company or have a controlling stake in a company without rendering any services or manufacture any goods. The company a holding company has controlling stake or share is called “subsidiaries“.
Holding company is a very good and profitable investment to invest in, if you are financially stable and have the right person to manage it for you. Holding company is usually a cooperation or a limited liability company (LLC). Holding company can be beneficial if you have a variety of businesses. A good example of a holding company is a conglomerates, which involves diversity in operations.
WHY YOU SHOULD INVESTMENT IN A HOLDING COMPANY
1.PROTECTION OF ASSETS: A holding company do hold valuable asset of a business or it’s subsidiaries. The business or subsidiaries then run the daily operations of the business. The asset’s held by the holding company is protected from creditors. If the business should incur any debt it won’t affect the asset’s held by a holding company.
2.REDUCE RISK: If a holding company owns any valuable asset’s , it is been disintegrated from its subsidiaries or operating company. If the operating company should face any loss it won’t affect the asset.
3.MINIMIZE TAX: A business or operating company can receive tax deduction, if a holding company has a share in the business. The tax the company or subsidiaries has to pay as a whole has been split to the holding company. Therefore the operation the holding company cover’s won’t be involve in the whole operating company tax.
4.MANAGEMENT CONTROL: If a holding company have 50% share or above In a company, it has every right to be involve in the decision making process of the company.
PROFITABILITY: Holding company is profitable from the dividend it’s receives from it’s subsidiaries or operating company. The dividend is as a result of it s share in the companies he invested it’s Money.
HOW TO FINANCE A HOLDING COMPANY
If you don’t have enough fund to set up a holding company is not a crime. One smart way I know you can do this , is by meeting people or investors and selling the idea to them. If they find it interesting and profitable to them, they might give you the require Capital to set up the company. Ensure you inform each of the investors on a particular stake they have in your company, so that you can share the profit among them when you receive your dividend from your subsidiaries. Remember you are a shareholder to other companies and they are a shareholder to you.
WHERE YOU CAN INVEST THE MONEY
You can invest the money in various sectors in the country, then share the profit among your investors from the dividend you receive from your subsidiaries or operating company. various sectors you can invest the money:
The finance sector example is a bank, Shipping and logistics company, oil and gas company, Manufacturing company, Real Estates etc.
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