A holding company is a company that owns assets but does not have any operations or the active business itself. The company could be a limited liability company or a limited partnership company. The type of assets held by the company are mainly shares in other companies.
Holding companies are easy to form and have a relatively low set-up cost. Their sole purpose is to hold the controlling stock or membership interests. They help their subsidiary company by using their resources to lower the overall operating costs.
How do holding companies work?
A holding company is a parent business entity that does not manufacture, sell or conduct other business operations. It is usually a corporation or LLC. The operating companies, a subsidiary company a holding company owns, do the manufacturing, selling, and other business operations. Other subsidiaries hold intellectual properties, real estate, vehicles, equipment, or other operating companies’ values.
A holding company can own 100% of the subsidiary or just enough stock or membership interests to control the subsidiary. Each subsidiary has its management, and the holding company’s management oversees how they are run. A holding company structure is popular among large enterprises with many business units.
What are the types of holding companies?
There are four types of holding companies: Pure, Mixed, Immediate, and Intermediate. A pure holding company’s sole purpose is to own stock in other companies. It does not participate in any other business activities.
Mixed holding companies, also known as holding-operating companies, control another firm and engage in its operations. Immediate holding companies retain voting stock or control of another company even if other entities already control the companies.
Lastly, an intermediate holding company is both a holding company and a subsidiary of a larger corporation. They may be exempted from publishing financial records as a holding company of the smaller group.
What are the advantages of having a holding company structure?
Smaller businesses, even a single entrepreneur, can also use holding companies. The structure is advantageous to companies because it protects liabilities, controls assets for less money, lowers debt financing costs, and fosters innovation. As mentioned above, it also does not require day-to-day management.
In Malta, setting up a holding company requires a minimum share capital of €1,165. Malta has double taxation agreements. Moreover, the government does not impose on dividends, profits, interest, and royalties that are not taxable when distributed to non-residents and foreign shareholders. There is no capital gains tax charged in a holding company by outside investors.
Integritas can work on all the registration, so there is no need to travel to Malta. Should you require any additional information, get in touch with our team today!