What is a holding company and how can it help you manage the family business? More and more families are daring with this model of management of their business assets, until now used only by large companies.

In today’s post we delve into holding structures, their operation and why they are an excellent way for the administration of family businesses.

What are holding companies?

A holding company is nothing more than a group of companies. In this form of organization there is a dominant enterprise on which subsidiaries or subordinate companies depend.

Although subsidiaries have their own legal personality, as they are subordinate to the parent company, they do not have real decision-making power.

In these groups, the company that actually controls the group is the parent company, as all the others are investee companies.

This means that inferior societies completely lack economic and financial management autonomy.

For this reason, the rules on the attribution of responsibility are increasingly pointing to the dominant company in the event of infringements and even crimes.

Main benefits of the holding company for the family business

holding structure
has been used by smaller and smaller companies, since this way of organizing the business has advantages at different levels.

Tax incentives

Holding companies are recognized as groups of companies in the Commercial Code. Therefore, the tax treatment they receive is adapted to their specific reality.

For example, they are provided with a particular tax regime that allows the compensation of profits and losses between the companies of the group.

In addition, in order to avoid double taxation, shares such as the distribution of profit or sale of shares between the companies of the group are not considered taxable.

Likewise, reductions are applied in both the Inheritance and Gift

Tax and the Wealth Tax.

Of course, as they are tax incentives, the group must comply with all the requirements that the tax legislation requires at all times.

Organisation of holding companies

One of the main advantages of holding companies is their modular structure,which allows some of the main corporate operations to be carried out with great ease.

In drawing up this structure, each subsidiary is responsible for a branch of the main business. In this way, it is easier for the dominant society to coordinate global action.

At the same time, if any part of the business had to be sold – for example, for having outsourced services, for presenting systematic losses or for receiving an interesting purchase proposal – the parent company can divest itself of its appendix without losing its ability to act.

Sustainable growth

Currently, businesses look at scalable architectures as a rising value. And, when a business can adapt to the circumstances of each moment thanks to its modular structure, it presents certain guarantees of continuity and solvency that other more solid figures do not have.

This makes the group of companies particularly interesting when what is desired is to manage a family business.

The possibility of adding or alienating subsidiaries allows the group to better adapt not only to the circumstances of the market but also to the skills and abilities of the family member who is in charge at all times.

If, for example, family members could not manage a branch of business at any given time, they could hire someone to run it. Similarly, if a new component capable of developing new functions were to enter the group, it would only have to design a new subsidiary.

All this, of course, controlled at all times from the matrix. That is, this type of social form allows each of the family partners to specialize in their branch, while the real control falls on the holding company of which they are all part.


These tax and organizational advantages make the holding company

one of the most interesting options when managing a family business.

Determining the profits of the holding company will, of course, depend on the concurrent circumstances in each scenario. However, the group of companies is one of the most flexible and advantageous ways to operate the family business.

While it is true that there are reasons to avoid the communication of assets when managing several companies, it is no less true that a family business seeks not only to maximize profit, but also to guarantee a source of income for all components.

Therefore, since family businesses have a solidarity component, the only disadvantage of holding companies (which may be the communication of assets and liabilities) is offset by the type of business to which it applies.