Question

What is a holding company?

Answer 1

Holding companies are business entities that engage in holding the securities and other financial assets of other companies and enterprises. The purpose of this is to own a controlling interest in these companies or to influence their management decisions and direction. Businesses within this industry do not manage operations or day-to-day functions within the businesses that they own. Holding companies are much more common than most people think, as they can add another layer of protection to those who own businesses.

 

To be considered a holding company, more than fifty percent of the company’s total income must come from equity investments. Businesses can still engage in the same activities as holding companies; however, if they do not receive at least half of their income from equity investments, they are not considered to be a holding company. Business owners often use holding companies to maintain their other businesses under the same entity.

 

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Answer 2

A holding company is a company, which deals with assets, investments, and management, instead of only dealing with goods and services with a view of earning profit from product sales. The holding companies can borrow funds in order to fund the subsidiaries' separate businesses.