Experience enhanced tax benefits, robust asset protection, and streamlined operations for small and medium-sized enterprises with a Holdco.

 

What is a Holdco?

A holding company (Holdco) is a business entity that does not produce goods or services but holds controlling shares or membership interests in other companies, known as subsidiaries. This structure allows the holding company to manage and oversee various business entities while centralizing control.  

 

Enhance Your Business Using a Holdco

Tax burden reduction: Optimize your tax strategy by deferring taxes and utilizing the lifetime capital gains exemption.

Asset protection and preservation: Shield your valuable assets from potential litigation and creditor claims by separating them from your operating company.

Flexibility and control over income: Manage your dividend income with greater control and customize cash flow to meet your personal and business needs.

 

MMT CPA – Proven Business Accountants

At MMT, our team of specialist CPAs in Calgary and Vancouver is dedicated to helping you maximize the benefits of a Holdco. We’ll guide you through the process and explain how to leverage advantages so that you can protect your business and yourself.

 

What Are The Benefits of a Holdco?

Tax Advantages: Optimize your tax strategy with a Holdco. Defer taxes until funds are distributed to shareholders and take advantage of the Lifetime Capital Gains Exemption, which can exempt profits from taxes when selling a small business. Holding companies also facilitate tax planning at both personal and corporate levels.

Risk Management: With a Holdco, you can separate your assets from your operating business, isolating risks and ensuring long-term security. This setup offers limited liability protection to shareholders, meaning they are only liable for the amount invested in the company.

Business Simplification: A Holdco centralizes control and distribution of assets and income, simplifying administrative tasks and financial reporting and allowing for more effective management of diverse business interests.

 

Types of Holding Companies:

Holding Non-Operating Company: Owns shares of subsidiaries but has no operations or revenue streams.

Holding Operating Company: Owns shares of subsidiaries and has its own operations and revenue streams.

Subsidiary Holding Company: Owns shares of other companies and is itself owned by another company.

 

Is a holding company a good idea for your business?

Holdco Pros

Optimized Tax Strategy: 

• • Defer taxes until funds are distributed to shareholders.

• • Potentially exempt profits from taxes when selling a small business.

Asset Protection: 

• • Shareholders are only liable for the amount of their investment.

• • Valuable assets protected from litigation and creditor claims.

Business Management Simplification:

• • Simplifies administrative tasks and financial reporting.

• • Creates a framework for acquiring new businesses or assets.

Estate Planning:

• • Allows for estate freezes and transferring future growth to the next generation.

• • Freezing share values for original shareholders can limit estate tax liability.

 

Holdco Cons

Increased Costs:

• • Fees associated with incorporating and maintaining a holding company.

• • Compliance fees for annual financial statements, corporate tax filings, and other government-related filings.

Complex Structure:

• • A complex holding company structure can be difficult to understand and manage.

• • Increased administrative tasks and complexity in financial reporting.

Regulatory Restrictions:

• • Holding companies face regulatory restrictions.

• • Holdcos must adhere to strict regulations.

Ready to Learn More About Holdcos?

Contact MMTCPA, and we’ll tell you how a Holdco can help your business.