Benefit of holding companies?

searcher profile

November 10, 2023

by a searcher in New York, NY, USA

What are the tax benefits of operating a holding company vs owning a stand alone S Corp/LLC/C Corp?

I hear about "tax deferral" but not sure if that exists also in the United States.

Would really appreciate any thoughts/advice on how a holding company benefits someone who intends to pursue a roll up strategy. Currently operating an S Corp and will be taxed at the highest marginal rates.

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commentor profile
Reply by a professional
from University of Houston in Chicago, IL 60610, USA
Can't speak to the tax benefits as this will probably depend on industry and deal structure. However, a few benefits that come to mind are (1) common ownership (thinking reporting purposes--all companies roll up to one and reported consolidated), (2) separate legal operating entities (limited exposure to liability between operations--this protects the ultimate owner or group of owners at the holdco level too), (3) ability to leverage pooling of funds/resources to get better financial backing/discounting/etc. and (4) operations (each company focuses on their unique business). Also, think about what S-Corps would need to be converted in order to be held by another entity. S-Corp ownership has certain shareholder-level requirements.
commentor profile
Reply by an investor
from Harvard University in Boston, MA, USA
Would like to hear thoughts on this as well.
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