holding company

Holding company

A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its Board of Directors.

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Holding Company

A company that owns enough stock in another company to control its operations. That is, the holding company can appoint the board of directors, set policies, and generally operate as the sole owner of another company, even if it does not actually own 100% of the stock. Some holding companies do not have operations of their own; that is, they exist simply to own and control other companies. In the United States, if a holding company owns at least 80% of the stock in another company, dividends paid to that holding company are not taxed. See also: Double Taxation.

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holding company

A type of parent company that exists primarily to exercise control over other firms. The control is exercised through ownership of a majority of the controlled firm's shares. Earnings of the holding company are derived from earnings of the controlled firms, which pay dividends on the shares. Compare subsidiary. See also operating unit.

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Holding company. By acquiring enough voting stock in another company, a holding company, also called a parent company, can exert control over the way the target company is run without actually owning it outright.

The advantages of this approach, provided that the holding company owns at least 80% of the voting shares, are that it receives tax-free dividends if the subsidiary prospers and can write off some of the operating losses if the subsidiary falters.

Because of its shareholder status, however, the holding company is insulated to some extent from the target company's liabilities.

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holding company

A company that owns or controls another company.