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From Wikipedia, the free encyclopedia

A holding company is a company or firm that owns 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 stock, in voting and value, must be owned before tax consolidation benefits such as tax-free dividends can be claimed.[1]

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.

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United States

In the United States, Berkshire Hathaway and American Investment Corporation are the two largest publicly-traded holding companies; they own 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 some instances, Holding Companies held capital for pending investments.

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Broadcasting

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 them subsidiary companies of 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.

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[2]:

  • 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 of 2005.

Parent company

A parent company is a 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. This would be known as a "wholly owned subsidiary."

See also

Notes

  1. ^ I.R.C. § 1504(a); I.R.C. § 243(a)(3).
  2. ^ "The PHC Trap". NYSSCPA. http://www.nyscpa.org/cpaajournal/old/1469571.htm. Retrieved 2008-11-26.  

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