Here at 180 Law Co., we get a lot of questions about LLCs and holding companies. So, what is a holding company? Simply put, a holding company is just an entity that owns other entities. Holding companies are sometimes referred to as umbrella companies or parent companies and they will own (or hold) the subsidiary or child companies.
Typically, the holding companies or parent companies won’t have their own business operations or conduct business on their own. In fact, the subsidiary company is the one that is in operation. The subsidiary company hires employees, hires vendors, sells the products and services, and so forth. In other words, the holding company literally only holds the subsidiaries. Depending on the nature of the business, the holding company may have some major assets or real estate that the subsidiaries may use. So, why would you create a holding company?
Primarily, having a holding company structure is for additional liability or asset protection. To back up a bit, the main reason we use LLCs and corporations is for liability protection. If an LLC is involved in a lawsuit or has another liability, it is only the assets of the LLC that are going to be subject to any risks. The best practice is to have each business operation owned by its own LLC. That’s where the holding company comes in to play!
In short, this episode of All Up In Yo’ Business is about holding companies. What they are, how to form one, and why you may or may not want to. Be sure to subscribe to our YouTube channel for more All Up In Yo’ Business! If you’re in Colorado, contact us today if you need help with your LLC.
Want more information on LLCs? Check out: LLC vs. Corporations