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ELI5: What is a HOLDINGS company and how does it work?
Main Post:
Is it the same as LLC? I don't know that too. I did my fair share of googling, but I still do not get it. Please someone help and explain it to me like a toddler. Much appreciated.
Top Comment: A Holding company is a business entity that doesn't produce any goods or services. They own a controlling stake in smaller (subsidiary) businesses that do produce something (operating companies). The Holding company keeps all the money used to invest in the operating companies (assets). The operating companies keep all the liabilities (taxes, lawsuits, etc) of operating a business. It is hard to sue the holding company instead of the operating company.
ELI5: What is a holding company and how do they make money?
Main Post: ELI5: What is a holding company and how do they make money?
Top Comment: A holding company is a company that owns other companies. It doesn't produce any products or services itself, but makes money by owning stakes in other businesses that do. All the profits from the businesses get passed up to the holdco, which can then given to shareholders or used to buy more businesses. So in essence, a holding company is a way for a single parent entity to own a group of companies in different industries, while profiting from their combined revenues and growth. The most famous example would be constellation software.