A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. In the U.S., 80% or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.
Sometimes a company intended to be a pure holding company identifies itself as such by adding "Holdings" or "(Holdings)" to its name, as in Sears Holdings.
In the United States
, Berkshire Hathaway
is one of the largest publicly-traded holding companies; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies. Two other large notable holding companies are UAL Corporation
and AMR Corporation
, publicly traded holding companies whose primary purposes are to wholly own United Airlines
and American Airlines
In U.S. broadcasting
, many major media conglomerates
have purchased smaller broadcasters outright, but have not changed the broadcast licenses
to reflect this, resulting in stations that are (for example) still licensed to Jacor
, effectively making them holding companies for their owner Clear Channel Communications
. This is sometimes also done on a per-market
basis; for example in Atlanta
and later WWWQ
are licensed to "WNNX LiCo, Inc." (LiCo meaning "license company"), both owned by Susquehanna Radio
(which was later sold to Cumulus Media
). In determining caps
to prevent excessive concentration of media ownership
, all of these are attributed
to the parent company, as are leased stations
, as a matter of broadcast regulation
Personal holding company
In the United States, a personal holding company is defined in section 542 of the Internal Revenue Code
. 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 five or fewer individuals.
Public utility holding company
Regarding the regulation of natural gas or electric utilities, a "Public Utility Holding Company" is a company which owns a subsidiary which distributes electricity or gas to retail customers. Such companies are subject to the Public Utility Holding Company Act
A parent company
is a holding company that owns enough voting stock
in another firm (subsidiary
) to control management and operations by influencing or electing its board of directors
. A parent company could simply be a company that wholly owns another company.