What is the point of a holding company?
A holding company is a parent business entity—usually a corporation or LLC—that doesn’t manufacture anything, sell any products or services, or conduct any other business operations. Its purpose, as the name implies, is to hold the controlling stock or membership interests in other companies.
Are holding companies a good investment?
Holding companies, say market experts, can be a good investment option. “A holding company typically holds majority voting capital in another company,” says Vikram Bohra, associate director, PricewaterhouseCoopers Pvt Ltd. While some holding companies are pure investment vehicles, some have their own operations too.
What are the disadvantages of a holding company?
- Over capitalization. Since capital of holding company and its subsidiaries may be pooled together it may result in over capitalization.
- Misuse of power.
- Exploitation of subsidiaries.
- Concentration of economic power.
- Secret monopoly.