Key takeaways
- Holding companies own assets and subsidiaries; minimal day-to-day operations.
- Operating companies run the daily business: product, sales, staff, revenue.
- The right structure can improve tax planning, asset protection, financing, and control.
What is a holding company?
A holding company primarily owns and manages assets or subsidiaries rather than selling products or services itself. Typical assets include:
- Shares in subsidiaries (majority or controlling stakes)
- Wholly owned operating companies
- IP (patents, trademarks, copyrights)
- Real estate and other tangible assets
- Financial assets (cash, bonds, equities)
- Loans and receivables
Holding companies generally have limited staff and no day-to-day operations; their purpose is strategic ownership, governance, and capital allocation.
What is an operating company?
An operating company is the “everyday” business that produces and sells goods or services, employs staff, and generates revenue. Most B2C and B2B firms fall into this category (retail, e-commerce, manufacturing, agencies, finance, etc.).
Many operating companies are owned by a holding company. The op-co runs the day-to-day; the hold-co makes high-level decisions (board, capital, M&A).
Why use a holding company?
1) Tax planning and deferral (jurisdiction-dependent)
With proper advice and in eligible jurisdictions, a hold-co structure may help you:
- Defer taxes on retained earnings and capital gains until distribution
- Deduct certain management, interest, or professional expenses
- Split income among eligible shareholders or entities
- Access favorable double-tax treaties and local incentives
Important: outcomes vary by country and facts. Always consult qualified tax counsel.
2) Asset protection and risk segmentation
Moving high-value assets (IP, real estate, cash reserves) into a hold-co can ring-fence them from op-co liabilities. If a subsidiary faces legal claims or insolvency, exposure may be limited to that entity.
3) Operational and administrative efficiency
A hold-co can centralize reporting, governance, financing, and compliance across multiple subsidiaries, standardizing policies while letting each op-co focus on customers and execution.
4) Board control and voting power
Controlling stakes (or dual-class shares) give the hold-co decisive say over M&A, divestitures, capital structure, and other strategic moves—delivered via the board elected by shareholders.
5) Financing advantages
A group balance sheet may improve access to external capital and enable internal capital markets (moving funds between subsidiaries). Larger groups can sometimes secure better credit terms than standalone op-cos.
Governance basics for holding companies
Keep assets and operations distinct
Avoid commingling. Maintain separate books, contracts, banking, and compliance for each subsidiary to preserve liability shields and regulatory clarity.
Choose appropriate legal entities
Depending on jurisdiction, holding and operating companies may be LLCs, C-Corps, S-Corps, Ltd/PLC, etc. Requirements differ; some regions impose stricter hold-co reporting.
Location matters: operating companies often need presence where they trade; holding companies may have more flexibility but also unique compliance duties.
Real-world patterns (illustrative)
- Tech groups: a parent owns multiple branded subsidiaries (e.g., social, video, hardware), enabling focused product teams and centralized capital allocation.
- Family offices: function like holding entities to manage wealth, private investments, and real estate across vehicles.
- Real estate groups: hold-cos own property SPVs to isolate asset-level risk and financing.
- Financial groups: bank/insurance/brokerage holdings consolidate governance and capital.
Do you need a holding company?
You might if you’ve reached material scale, hold valuable IP or property, operate in multiple markets, or plan acquisitions. Consider:
- Assets at risk that deserve ring-fencing
- Tax and treaty eligibility where you operate and own
- Administrative capacity to maintain multiple entities
- Cost-benefit (legal, accounting, governance)
Small firms or single-market businesses may not gain enough to justify the complexity professional advice is essential.
How Easykonto supports hold-co and op-co structures
Whether you run a single operating company or a multi-entity group, Easykonto helps you manage money cleanly across entities and currencies:
- Multi-currency business accounts (hold, receive, pay in 30+ currencies)
- Entity-by-entity controls: separate accounts and statements for each company to keep books clean
- Transparent FX with control over conversion timing
- Real-time monitoring and exportable statements for consolidation
- Built-in compliance (KYC/KYB, ongoing screening)
- User roles & approvals to match your group’s governance
Set up the operating company and the holding company with clearly separated accounts, then consolidate at month-end without messy intermixing.
Disclaimer
This article is general information, not legal, tax, or accounting advice. Outcomes depend on your facts and jurisdiction. Consult qualified professionals before acting.
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