A HOLDING COMPANY is a company that owns other companies' outstanding stock . The term usually refers to a company that does not produce goods or services itself; rather, its purpose is to own shares of other companies to form a corporate group . Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
In the United States , 80% of stock, in voting and value, must be owned before tax consolidation benefits such as tax-free dividends can be claimed. That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay taxes on dividends paid by Company B to its stockholders, as the payment of dividends from B to A is essentially Company A transferring cash from one company to the other. Any other shareholders of Company B will pay the usual taxes on dividends, as they are legitimate and ordinary dividends to these shareholders .
Sometimes a company intended to be a pure holding company identifies itself as such by adding "Holding" or "Holdings" to its name.
* 1 United States
* 1.1 Banking * 1.2 Utilities * 1.3 Broadcasting * 1.4 Personal holding company
* 2 Parent company * 3 See also * 4 References * 5 External links
Further information: bank holding company
After the financial crisis of 2007–08 , many U.S. investment banks converted to holding companies. According to the Federal Financial Institutions Examination Council's (FFIEC) website, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo ">
* Gross income test: At least 60% of the corporation's adjusted ordinary gross income is from dividends, interest, rent, and royalties. * Stock ownership test: More than 50% in value of the corporation's outstanding stock is owned by five or fewer individuals.
Main article: Parent company
A parent company is a company that owns enough voting stock in another firm (subsidiary ) to control management and operations by influencing or electing its board of directors . A parent company could simply be a company that wholly owns another company, which is then known as a "wholly owned subsidiary ").
When an existing company establishes a new company and keeps majority shares with itself, and invites other companies to buy minority shares, it is called a parent company.
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* ^ I.R.C. § 1504(a); I.R.C. § 243(a)(3). * ^ "Holding Companies with Assets Greater Than $10 Billion". National Information Center. June 30, 2014. Retrieved 2014-11-28. * ^ Hirsh, Richard. "Emergence of Electrical Utilities in America".
* ^ "Public vs. Private Power : from FDR to Today". _PBS.org_. Retrieved 2014-11-28.