How to set up a holding company

Discover what a holding company is, how to set one up and whether it's worth doing.

A holding company doesn’t offer goods or services to the public, so what’s the point of having one? Read on to find out.

What is a holding company?

A holding company is a parent business entity, usually a corporation, which owns one or several other businesses. The holding company doesn’t produce or sell goods or services. Its only purpose is to hold the controlling share of its subsidiary businesses.

Why set up a holding company?

By creating a holding company, you could potentially set up the different arms of your business as separate companies. These would be subsidiaries of your holding company.

Here are the key advantages of doing this:

  • Reduce your liability. Let’s imagine you owned an art gallery and also taught painting classes. By separating these arms into two subsidiaries of a holding company, you decrease the liabilities of each business. Now, if your art gallery goes into debt, creditors can only seek funds from the gallery business. They can’t take cash or assets away from your teaching business.
  • Encourage growth and innovation. Let’s now imagine you wanted to pump money into an innovative new service, such as “virtual reality” art. If this risky unknown venture was part of a single business, it might put off existing or potential investors. However, by using a holding company structure, you can launch the “virtual reality” service as a brand new business that has no impact on the profits of your existing companies. Investors in these proven companies would then have no reason to worry about this new venture.
  • Control your assets for less money. When you use a holding company structure, you can have a controlling interest in several companies without owning all the shares.
  • Tax exemptions. You can often pay less tax as a business owner by setting up a holding company structure.

How to set up a holding company

The process of forming a holding company is no different to setting up any other limited company. Once your holding company is set up, you’ll have to transfer the ownership of your subsidiaries’ shares and assets to the holding company. A solicitor will be able to assist you with this process.

How much does it cost to set up a holding company?

As with any other limited company, it will cost £12 to register your limited company with Companies House online or £40 by post. On top of that, it’ll cost £170 to trademark your company name.

Pros and cons

Pros

  • Ring-fence your business arms and decrease your liabilities
  • Encourage growth and innovation
  • Control assets for less money
  • Pay less tax, in some cases

Cons

  • You’ll pay extra fees to set up the holding company
  • The process of transferring assets and shares can be complicated and expensive
  • When you sell a subsidiary of a holding company, this can create financial and structural complications

The bottom line

It might be a bit of an administrative hassle to set up a holding company, but if you have two separate business ventures, it’s often worth doing.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked
Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site