Fast Facts on Holding Companies: Part 1

June 29, 2015

If you’ve been wondering about whether a holding company could benefit you, read on through this first part of a two-part post. A holding company is a special entity equipped to hold investments, serving as a conduit through which the company controls and enables the underlying businesses. shutterstock_209711911

It can be used for both individuals and corporations. From the individual perspective, it can be used as an investment vehicle. For corporations, a holding company can benefit a risk-management strategy. The key benefit of this structure is that it leverages money and has the ability to make a small investment hold control over a much bigger portfolio.

As an example, a holding company might be used to invest $1 million as 33% holding share in order to finance a $6 million apartment building. Outside investors would contribute $2 million and the other $3 million is financed through a bank. This means that a $6 million asset has been created from a $1 million investment, offering tremendous leverage. Creating a series of distinct subsidiaries (known as silos), allows for others to remain intact even if one fails. Contact us today to learn more about holding companies- we’re here to help you determine if this is a great opportunity for your business or individual needs. Reach out to info@lawesq.net.

 


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