A holding company may be formed for risk-management, tax minimization, privacy and flexibility. Such structuring was previously reserved for large corporations, but has since spread to the extent small e-ecommerce stores now utilize holding companies.
A holding company engages in no business activities of its own. Instead, it holds cash and other assets, e.g. trademarks. These assets are loaned and leased to subsidiaries which perform operations. This prevents operational errors from leading to asset seizures.
Hold valuable assets or investments in other companies. Keeps assets away from operational liabilities and personal creditors.
Pooling resources across companies is easier. The holding company acts as a bank which loans to subsidiaries when needed.
Through accounting strategies, income is shifted from high tax jurisdictions to low or no tax jurisdictions.
Wyoming has no corporate or personal income tax. Annual reports begin at $50 and are hundreds of dollars cheaper than Nevada and Delaware.
Wyoming allows anonymous ownership. This private company can be the public face in other jurisdictions. Thus providing privacy in places which don't initially appear to allow it.
Wyoming has specific statutes protecting Single-Member LLCs. This helps ensure operational liabilities do not become holding company liabilities.
These benefits arise through forming multiple entities. One entity isolates personal assets from business liabilities. It does not separate business assets from business liabilities, nor allow for income shifting.
Wyoming is popular given there are no taxes and specific statutes protecting Single Member LLCs. This provides more protection from a subsidiary's risk.
A holding company setup does require more paperwork and book keeping. Here are some things to keep in mind when considering a holding company...
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Protect yourself against creditors, including the government and spouses.
Tax deductible contributions and deferred earnings, with credit protection.