What is a Holding Company and Why should you have one?
The question is, why should you start and or structure your LLC, your S corp, your C corp, your legal entity as a holding company?
I know that a lot of people who disagree with this whole entire concept of a holding company, perhaps they might say that it's not even worth it. And that's not the direction that you want to go.
Watch my video "The Power of a Holding Company
Well, I got a few reasons why I believe you should start your company and or structure the company that you already have if you started it as a holding company, number one for protection. A lot of times when people start and structure their legal entities as holding companies, it's first and foremost for protection. For example, when you start your holding company, it is your parent company.
You're on the top of the mountain, the top of the business food chain with your holding company, of course, you may have other entities, other products, other services, other ideas that you want to introduce to the market, whether it's a cleaning business, a landscaping business or a painting business. It could be an apparel business. It could be other products and services that you want to introduce to the market that you might not want to mesh all together in one entity. So what you do is start and structure your entity as a holding company.
Now, that gives your main parent umbrella company the protection that it needs so that whatever other entity that you start under it, it's going to operate as a separate entity, although it will be owned by the main entity. So No. One, it would be protection. Number two, I would say it's for purchasing power. It's a different thing for you to have one entity with 20 things going on in that one entity is a different thing between having that and having one entity.
But it owns 19 other entities, especially the other 19 other entities or things that you're doing are actually generating revenue because now you have one entity, which is the holding company, and it has a lot of protection, number one, but it also has a lot of purchasing power because it owns the interest, if not all of the interest of 19 other companies. And so that's why I believe you should always start and or if you've already started to structure your legal entity as a holding company.
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