HOLDING (What it is, Types, Objectives and Advantages)

A holding company is a way of grouping and integrating several Business organizations which can be dedicated to various economic or industrial activities. They are widely used today in the business world.

These are made up of a group of companies in which one of them, the one with the majority shareholding, manages the group of companies. That is, one dominates the business and the other companies are subordinate to it.

In a company holding company It seeks to obtain the shares of other companies and thus, to control them. In this sense, a holding company being a commercial societyOne of its main functions is to control and manage the property of other companies or companies.

Holding types

It is also known as holding companies, management companies, multipurpose companies or company holding shares, among others. The assets of these companies are the shares of the companies that comprise it.

There are different types of companies.

• The so-called "financial" which are those created through banks and other financial entities.
• Those that originate from a family heritage.
• Those made up of state companies.

The holding can be thought of as a form of business integration with all the advantages, services and benefits that a company has. However, it can also be the case that a group of capitalists acquire properties and other firms looking for only one economic profitability leaving out the integration of activities.

Objectives of the holding

Create a business structure that has some advantages, not only in terms of managing the commercial management, but also seeks the possibility of lowering the tax burden, that is, paying less taxes.

As the holding company is a structure that establishes a hierarchical organization where the main financial company, that is, that company that has the majority of the shares, is the one who directs it and has control of all the others that it make up. So, it can be said that a holding company Its main objective is to control all the actions of the associated companies.

Another objective is to guarantee control of the different commercial factors within the same sector. In other words, another objective is to also seek the centralization of production.

Advantages and disadvantages

Today most of the world's companies operate under a business holding scheme. However, there is also much debate about the responsibility that the group has over subsidiaries or subordinate companies. Among the advantages we find:

• Optimize the distribution of structural expenses among the different companies that make up the holding company.
• Seeking tax incentives because the companies that should pay and pay each one independently under this structure is done globally.
• Cover more sectors of the market in an easier and faster way.
• Consolidate the annual accounts for a better control of financial or administrative activity, which generates a more accurate image of the economic reality.
• Reduce the commercial risk of the different economic activities, limiting resources to what is essential for the fulfillment of objectives.

Disadvantages include:

• Regarding the organizational aspect, it could happen that there is a failure in the information and communication between the companies of the group that make up the holding company and there could probably be a tendency towards duplication of tasks, friction or lack of agreement between they.
• It is necessary to carry out a detailed tax study of each case as a structure holding type it may work very well for a certain case, but not for another case.
• The fact that there is a predominant society over the others can lead to a dilution of corporate identity because it is a complicated structure. The group could come to control a certain market and, therefore, create a monopoly.
• Double taxation could be generated if shares in some group companies are transferred or sold.
• It would carry a higher tax cost when the dividend distribution occurs.

Importance of the holding

Establish a holding company it can have many benefits as long as important sectors of the same market are controlled. This would guarantee that all the companies that are part of that holding have access to materials, equipment, logistics and financing, among others.

The most important aspect in a holding company is the profit of the efficiency fiscal. That is, the tax payment taking into account the consolidated results is generally lower that the sum of the charges on each of the group companies considered in a way individual.

It is very important because in a holding company, in addition to controlling all the businesses and management of the companies, they also manage to control almost all the factors and elements that are part of the productive process until I get to consumer final.

Operating rules

To the create a holding It is essential to have clear rules that will regulate the internal movement of the company and the relationship between the different partners. Hence the importance that the partners that make up the holding company are precise and explain in their statutes the requirements and methods that will guide the management in the company.

The objective is to avoid future problems that may arise as a result of the own tensions that generally accompany the maintenance of a business as large as the holding company. When everything is previously described and accepted, future changes in and out of partners will have minimal impact on the business hierarchy.

Due to the broad advantages of having a holding company, more and more entrepreneurs are perceived as the main modality for business growth, the creation of this type of business. Its main drawback is that despite the fact that the subordinates have legal autonomy, their economic autonomy is non-existent.