The holding company

What is a holding company?

A holding company is the highest company in a group of companies. A holding company is usually a private limited company (BV). A holding company is also called:

• a parent company (moedervennootschap)
• financial holding company
• management company (beheer BV)

What is the structure of a holding company?

The holding company is part of a holding company structure. This is a combination of several related BVs. A holding company structure consists of at least 2 parts:

1. The holding company

This is the BV that houses important assets, such as:

• money
• real estate
• intellectual propety

The holding company own the shares in the operating company.

2. The operating company

This is the company where the daily activities take place. Such as:

• manufacturing products
• carrying out assignments
• recruiting staff

A holding company may have one or more operating companies.

Other names for an operating company are ‘BV’ or ‘subsidiary’, or 'daughter company'.

Relation between holding and operating company

1. The holding company is owned by the director-major shareholder or several shareholders.
2. The operating company is owned by the holding company.

You carry out your high-risk business activities with the operating company. You place your profit, pension, and other valuable assets in the holding company. This way you spread your risk. If the operating company were to run into difficulties and go into liquidation, the assets held by the holding company would remain outside the liquidation proceedings.

Setting up a holding company structure

In practice, entrepreneurs often apply the structure with a holding company and operating company in this way:

• You first establish the holding BV with a civil-law notary.
• When it is established, you receive shares in the holding BV.
• Then you set up a second BV on behalf of the holding company. This is the operating company.
• The holding company receives shares in the operating company.

Setting up a holding with a sole proprietoship

You can also set up a holding company from an existing sole proprietorship. You then first convert your sole proprietorship to a BV. Or you first set up a holding company construction and then end your sole proprietorship.

Advantages and disadvantages of a holding company

Advantages

• A holding company structure makes it easier to transfer or sell parts of the business.
• You can spread the risks.
• You can transfer the operating company’s profits to the holding company tax-free under the participation exemption (deelnemingsvrijstelling, in Dutch). These profits are then taxed only at the level of the operating company and not again at the level of the holding company.
• If you are a manager director of several operating companies, you can use the holding company to ensure that you only have to apply the ‘gebruikelijkloonregeling’ (customary salary scheme, in Dutch) scheme once.
• If the holding company owns at least 95 % of the shares in an operating company, the holding company and the operating company can form a fiscal unity. Profits and losses of the BVs can then be offset against each other for tax purposes to save on tax.

Disadvantages

• It is more expensive to set up a holding company structure, as you must incorporate at least two BVs. This also means that the annual costs for administration and the preparation of the financial statements are higher.
• The administration is more complex. For example, you must ensure that payments between the holding company and the operating company are properly recorded in your accounts.

Check out all the pros and cons of a holding company structure

Do you have any questions?

• Contact KVK
• Ask other entrepreneurs for advice on Higherlevel.nl