Holding company
From Wikipedia, the free encyclopedia
A holding company or parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.
Strictly speaking, the term "holding company" might be used to describe any company that owns a majority of shares in another company. Usually though, the term refers to a company which does not produce goods or services itself, but, rather, whose only purpose is owning shares of other companies (or owning other companies outright). Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
Berkshire Hathaway is one of the largest publicly traded holding companies; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies. Another large holding company of note is UAL Corporation, a publicly traded holding company whose primary purpose is to wholly own United Airlines.
Sometimes a company intended to be a pure holding company identifies itself as such by adding "Holdings" or "(Holdings)" to its name.
[edit] Personal holding company
A personal holding company is defined in Internal Revenue Code section 542. Basically, a corporation is a personal holding company if both of the following requirements are met:
- Personal Holding Company Income Test. At least 60% of the corporation's adjusted ordinary gross income for the tax year is from dividends, interest, rent, and royalties.
- Stock Ownership Requirement. At any time during the last half of the tax year, more than 50% in value of the corporation's outstanding stock is owned, directly or indirectly, by 5 or fewer individuals.
