With the continuous growth of the offshore industry, the dimensions of investment have drastically increased. Multi-national companies figure out the necessary ways to decrease the tax burden, and one of the widely chosen options is the incorporation of a holding company.
A holding company is a legal business entity that gets incorporated with the intent of owning shares and stocks of other companies. However, the entity is not involved in any financial transaction or production of business goods or services. The primary intent behind owning the shares of other companies is to form a corporate group, which can be defined as a collection of business entities (parent and subsidiary entities). This guide outlines the core reasons that are the core drivers, driving international investors to invest in one. If you are planning to invest in a holding company, then this is a must-read for you.
1.Centralized Management Structure
When it comes to management, a holding company and the subsidiary companies are usually controlled by the same board of directors. This allows a structured framework, and thus allows the business entity to maximize its performance and growth level.
2.Assurance of Better Control
Since a holding company has got a centralized management structure, it becomes easy to monitor and track the progress. In simple ways, we can say that holding companies assure better control to business investors.
3.Easy in Ownership Transfer
The ownership of a holding company can be easily transferred, and thus it turns out to be an added advantage that provokes the business investors to come forward and invest.
The concept of liability protection can be understood by the fact that the assets used by the operating companies are placed in different entities, which provides a liability protection shield. In short, the creditor of any subsidiary company cannot reach protected assets.
5.High-end Asset Protection
Asset protection is one of the core reasons when it comes to offshore investment. For a holding company, it becomes more comfortable and flexible to hold the various types of assets like:
- Intellectual property
As per the guidelines, the subsidiary companies focus on business transactions and daily operations. However, the assets held by the entity gets managed by the holding company and stay in safe-hands from the creditors. Here’s a guide on Asset Protection Trust Planning Strategies that will help you to understand the trust strategies.
Tax is another major concern that is prevailing in the minds of global business investors. Aiming to provide a tax-benefit business environment, most of the countries have accepted to turn their business jurisdiction as a tax-haven jurisdiction. There are multiple benefits that a business owner can avail by proceeding ahead with the tax-havens. Some of them are stated as:
- Access to the international market
- Offshore tax deferral
- Tax off-setting incentives
- Accessibility to a global investment portfolio
- Transfer of assets in a natural way etc.
To gain a better understanding of the tax benefits, read our guide, “What are the Tax Advantages of Starting an Offshore Business?”
7.Drastic Growth and Development Options
With the establishment of a holding company, there exist a drastic growth and development options for the business entity. The assets held by the business entity allows the group to:
- Accept and diversify them more efficiently
- Figure out new investment opportunities
- Exit ventures (if required)
A holding company provides enormous business investment options to the group members or subsidiaries to invest in international platforms.
Another reason that the international investors are keen on investing in a holding company is that the business entity allows the flexibility of succession planning. In this case, there is a surety that the business operations get performed even if the key members of the company exit.
Taking a step ahead with the guidance of certified individuals helps the business owners to perform the activities smoothly. Few of the advantages that one can gain are:
- The legal proceedings get sorted easily
- The quick company incorporation process
- The market insights and condition can be easily known
- They act as a guide and can come up with secure set-up solutions
To know in-depth, follow our latest guide on Four Core Reasons to Hire an Offshore Business Consultant.
Business Setup Worldwide has been performing as one of the top ten business consultants in Dubai who has been helping business clients to establish their business entities all around the world. Be it onshore or offshore company formation (Difference between onshore and offshore company), our business advisors are well-versed with the incorporation process. If you want to start your holding company in any of the popular offshore jurisdictions, feel free to have a word with our experts. Contact us today-we’d be glad to assist.