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A holding company is a company that owns the stock of other companies in a way that allows it to control the decisions and policies of those companies. In other words, a holding company is the top level in a hierarchy of companies.

A holding company can take one of several legal forms and be a corporation, a limited liability company or a limited partnership, depending on the jurisdiction and purpose of the company. A holding company is not required to own 100% of the subsidiary's shares - the actual percentage required is determined on a case-by-case basis, but the minimum is most often set at 50% + 1 share, i.e. H. the majority of the shares. In some jurisdictions, the percentage of shares owned by a holding company can affect tax procedures. For example, in the United States, a holding company must own 80% of its subsidiary's stock to be eligible for tax-free dividends and other tax benefits.

A holding company offers a certain advantage as it is protected against losses. So if one of the companies in which the holding has a stake goes bankrupt, this loss does not affect the holding. Holding companies also allow you to protect your confidentiality as authority and decision-making are centralized.

Functions of a holding company
The main function of a holding company is to minimize risk by dividing assets between different subsidiaries. That is, it is not formed with the aim of producing and/or distributing goods and services (as is usually the case), but to structure a group of companies in a way that minimizes risk.

This is achieved by limiting the scope of liability for the holding company itself and for each of its subsidiaries. For example, one subsidiary might own real estate on behalf of the holding company, another might handle intellectual property and a third might manage branding, etc. Thus, the different assets of the holding company are divided, and if one of subsidiaries fails and goes bankrupt this will not endanger the holding company or its other structural components, as they are not legally liable for the losses of subsidiaries. The primary function of a holding company is, therefore, to manage the actions of its subsidiaries.