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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.^{citation needed}

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.

United States

n 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.

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 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.

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:

• 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.

Parent company

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.

See also

• Bank holding company
• Conglomerate (company)
• Investment company
• Patent holding company
• Shell corporation

References

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Wikipedia content modification information:

• This page was last modified on 2 September 2008, at 23:13.

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