From time to time you may hear someone talk about their holding company (In Alberta technically it is a holding "corporation"). What is a holding company (or "holdco"), and what value is there in having one? A holdco is a corporation which does not carry on active operations, and instead owns the shares of other active companies (called operating corporations.
Why have a holdco?
Holdco's are useful for asset protection and asset segregation. The holdco often ends up owning shares in other companies (called subsidiaries). Money can sometimes flow back and forth tax free. If one of the operating corporations loses money, the assets held by the holdco (and any other opco's) are protected.
Holdco's can be used for tax and estate planning reasons as well. They can assist with eligibility for the Canadian Controlled Private Corporation Capital Gains Exemption.
If you require advice setting up a holdco, please feel free to contact us.
The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.
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