Business, Legal & Accounting Glossary
n. a company, usually a corporation, which is created to own the stock of other corporations, thereby often controlling the management and policies of all of them.
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, respectively.
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 and Citicasters, effectively making the holding companies for their owner Clear Channel Communications. This is sometimes also done on a per-market basis; for example, in Atlanta, both WNNX 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.
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:
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.
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This glossary post was last updated: 28th April, 2020 | 5 Views.