Most entrepreneurs have yet to learn the benefits that the establishment of a holding company can offer, thinking that such instruments are only advantageous for large corporations.
If used correctly, a company of this type can become an effective means of protecting one’s profits and family assets and offering significant tax advantages.
What Is Holding?
Let’s start with the definition: the holding company (known in Italy simply as a holding company) is a financial company holding shareholdings or quotas in other subsidiary companies. Therefore, he carries out management and capital management activities for other companies. Thus a pyramid structure is created, at the top of which we find the parent company or parent company (also called parent ), and at the base, the daughter or subsidiary companies ( subsidiaries ). Based on their function and how they operate, holding companies can be divided into three macro-groups:
- Pure or financial holding companies, whose main activity consists of controlling and coordinating the group companies’ operational and strategic activities. They do not carry out any production or exchange of goods and services.
- Impure or mixed (or again, operational) holding companies, which not only hold and manage shareholdings in companies but undertake real business activities of a commercial or industrial type.
- Investment holdings, i.e., holding companies that acquire shareholdings to obtain dividends and capital gains without controlling and managing the daughter companies’ capital.
Now let’s see in more detail the main types of holding companies based on the particular characteristics they assume.
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Types Of Holding
Family Holding
It is certainly the best-known and most widespread form in Italy; the economic and productive fabric is largely made up of family-run businesses, many small or medium-sized (the so-called SMEs). The family holding company is particularly useful for preserving the family assets from external attacks and possible illicit behavior by directors and partners during the transition from one generation of directors to another. Above all, it allows you to administer and manage assets more efficiently.
A Managerial Or Sectoral Holding Company
This holding controls companies united by activities with strategic interdependencies, bringing together businesses operating in complementary sectors to manage them synergistically. The management holding company can be financial and operational, carrying out or not carrying out production activities or exchanging goods and services.
Sub-Holding
The sub-holding is a holding which is interposed to all effects between the parent company and the subsidiaries operating in the same business sector and is almost always a holding of a financial type.
Advantages Of A Holding
Now that we have seen what a holding company is, let’s find its benefits.
- Through the creation of a holding company, an entrepreneur has the opportunity to expand his business, extending his activities also in complementary sectors. This is very useful, especially in this historical moment characterized by continuous and profound changes within the economic and productive systems.
- Another reason for opting for establishing a holding company is the protection of company assets, protecting them from attacks by possible creditors and, in general, from family, inheritance, and tax matters.
- As we have seen before, creating a holding company can help manage the generational transition, i.e., the process by which the capital and management of a company are transferred from the founders to the successors, to guarantee the company’s continuity.
- As far as the request for financing is concerned, the presence of a holding company guarantees the undoubted advantage of having greater credibility in the eyes of the banking system, as it can give greater guarantees of solvency and stability.
- Tax optimization is another good reason to choose the form of holding company. It is, in fact, an excellent tax planning tool since it allows you to take advantage of some special preferential tax regimes (for example, that of the Participation Exemption ), as well as to implement particular strategies that allow for an optimized and more efficient distribution of profits from the point of view of tax levy.
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