Holding company
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 purpose is to own 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 US, 80% or more of stock, in voting and value, must be owned before tax
consolidation benefits such as tax-free dividend
s can be claimed.
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.
is the largest publicly-traded holding company; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies. Two other large notable holding companies are United Continental Holdings
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 have held capital for pending investments.
, many major media conglomerate
s have purchased smaller broadcasters outright, but have not changed the broadcast license
s 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 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 attribute
d to the parent company, as are leased station
s, as a matter of broadcast regulation.
. A corporation is a personal holding company if both of the following requirements are met:
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."
Firm
A firm is a business.Firm or The Firm may also refer to:-Organizations:* Hooligan firm, a group of unruly football fans* The Firm, Inc., a talent management company* Fair Immigration Reform Movement...
that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
for the owners and can allow the ownership and control of a number of different companies. In the US, 80% or more of stock, in voting and value, must be owned before tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
consolidation benefits such as tax-free dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s can be claimed.
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
In the US, Berkshire HathawayBerkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
is the largest publicly-traded holding company; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies. Two other large notable holding companies are United Continental Holdings
United Continental Holdings
United Continental Holdings, Inc. , is a publicly traded airline holding company, incorporated in Delaware with headquarters in the United Building in Chicago, Illinois. UCH owns and operates United Airlines, Inc. and Continental Airlines, Inc. both of which use the trade name United Airlines...
and AMR Corporation, publicly traded holding companies whose primary purposes are to wholly own United Airlines
United Airlines
United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees United Air Lines, Inc., is the world's largest airline with 86,852 employees (which includes the entire holding company United Continental...
and American Airlines
American Airlines
American Airlines, Inc. is the world's fourth-largest airline in passenger miles transported and operating revenues. American Airlines is a subsidiary of the AMR Corporation and is headquartered in Fort Worth, Texas adjacent to its largest hub at Dallas/Fort Worth International Airport...
, respectively. In some instances, holding companies have held capital for pending investments.
Broadcasting
In US broadcastingBroadcasting
Broadcasting is the distribution of audio and video content to a dispersed audience via any audio visual medium. Receiving parties may include the general public or a relatively large subset of thereof...
, many major media conglomerate
Media conglomerate
A media conglomerate, media group or media institution is a company that owns large numbers of companies in various mass media such as television, radio, publishing, movies, and the Internet...
s have purchased smaller broadcasters outright, but have not changed the broadcast license
Broadcast license
A broadcast license or broadcast license is a specific type of spectrum license that grants the licensee the privilege to use a portion of the radio frequency spectrum in a given geographical area for broadcasting purposes. The licenses are generally straddled with additional restrictions that...
s to reflect this, resulting in stations that are (for example) still licensed to Jacor
Jacor
Jacor Communications was a media corporation which owned a large number of radio stations in the United States. Inside the radio industry, Jacor was seen as one of the most competitive broadcast companies in history. Jacor's re-image in 1996 created the slogan "The Noise You Can't Ignore".Jacor was...
and Citicasters, effectively making them subsidiary companies of their owner Clear Channel Communications
Clear Channel Communications
Clear Channel Communications, Inc. is an American media conglomerate company headquartered in San Antonio, Texas. It was founded in 1972 by Lowry Mays and Red McCombs, and was taken private by Bain Capital LLC and Thomas H. Lee Partners LP in a leveraged buyout in 2008...
. This is sometimes done on a per-market
Media market
A media market, broadcast market, media region, designated market area , Television Market Area , or simply market is a region where the population can receive the same television and radio station offerings, and may also include other types of media including newspapers and Internet content...
basis; for example in Atlanta both WNNX
WNNX (FM)
WWWQ FM 99.7, known as "Q100", is an Atlanta radio station airing a top-40 contemporary hit radio format. It is owned and operated by Cumulus Media from the same building as its other co-owned sister stations WNNX FM "Rock 100.5", W258BU FM 99.1 "99X", and W250BC FM 97.9 "Journey 97-9"...
and later WWWQ
WWWQ (FM)
WNNX is an Atlanta radio station that is owned and operated by Cumulus Media. The station broadcasts from the same building as its other Cumulus Atlanta sister stations WWWQ FM 99.7 and 99X...
are licensed to "WNNX LiCo, Inc." (LiCo meaning "license company"), both owned by Susquehanna Radio (which was later sold to Cumulus Media
Cumulus Media
Cumulus Media, Inc. is the second largest Owner and Operator of AM and FM radio stations in the United States, behind Clear Channel Communications, operating 570 stations in 150 markets as of September 16, 2011. The company also owns Cumulus Media Networks...
). In determining caps to prevent excessive concentration of media ownership
Concentration of media ownership
Concentration of media ownership refers to a process whereby progressively fewer individuals or organizations control increasing shares of the mass media...
, all of these are attribute
Attribution
Attribution may refer to:Something, such as a quality or characteristic, that is related to a particular possessor; an attribute.*Attribution , concept in copyright law requiring an author to be credited...
d to the parent company, as are leased station
Local marketing agreement
In U.S. and Canadian broadcasting, a local marketing agreement is an agreement in which one company agrees to operate a radio or television station owned by another licensee...
s, as a matter of broadcast regulation.
Personal holding company
In the US, a personal holding company is defined in section 542 of the Internal Revenue CodeInternal Revenue Code
The Internal Revenue Code is the domestic portion of Federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States 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.
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 companyParent company
A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company...
is a company that owns enough voting stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
in another firm (subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
) to control management and operations by influencing or electing its board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
. A parent company could simply be a company that wholly owns another company. This would be known as a "wholly owned subsidiary."
See also
- Bank holding company
- ConglomerateConglomerate (company)A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...
- Dubai WorldDubai WorldDubai World is an investment company that manages and supervises a portfolio of businesses and projects for the Dubai government across a wide range of industry segments and projects that promote Dubai as a hub for commerce and trading. It is the emirate's flag bearer in global investments and has...
- Investment companyInvestment companyAn investment company is a company whose main business is holding securities of other companies purely for investment purposes. The investment company invests money on behalf of its shareholders who in turn share in the profits and losses....
- Airline holding companies
- Patent holding companyPatent holding companyPatent holding companies are companies set up to administer, consolidate and license patents or otherwise enforce patent rights, such as through litigation...
- Public Utility Holding Company Act of 1935Public Utility Holding Company Act of 1935The Public Utility Holding Company Act of 1935 , , also known as the Wheeler-Rayburn Act, was a law that was passed by the United States Congress to facilitate regulation of electric utilities, by either limiting their operations to a single state, and thus subjecting them to effective state...
- Samuel InsullSamuel InsullSamuel Insull was an Anglo-American innovator and investor based in Chicago who greatly contributed to creating an integrated electrical infrastructure in the United States. Insull was notable for purchasing utilities and railroads using holding companies, as well as the abuse of them...
- Shell corporation
External links
- Emergence of Electrical Utilities in America, Smithsonian Institute, National Museum of American HistoryNational Museum of American HistoryThe National Museum of American History: Kenneth E. Behring Center collects, preserves and displays the heritage of the United States in the areas of social, political, cultural, scientific and military history. Among the items on display are the original Star-Spangled Banner and Archie Bunker's...