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Holding company formation
Holding company formation can be advantageous for various reasons. The word “holding” denotes an organizational form. Because a holding company is always composed of at least two companies i.e the parent company and the subsidiary. The parent company is called the holding company. The parent company owns shares in the subsidiary.
Holdings can therefore also be useful for smaller companies.
Altogether one distinguishes five different holding variants.
The subsidiary is a branch and the parent company is operational.
Important decisions and control are exercised by the parent company. The head office of the parent company can therefore be relocated for tax reasons in a country with more favorable tax laws.
The financial holding either serves as an intragroup bank or assumes asset management.
Organizational or structural holding
If a company is divided into different divisions, it is called an organizational or structural holding.
Holding company as a share holder
The holding acts only as a shareholder, the operational control is taken over by the subsidiary, in order to reduce the administrative expenditure.
When does a holding company make sense?
It makes sense to start a holding company, if there are several founders or shareholders. Each individual can thus incorporate their own holding company, which then participates in the operating subsidiary.
It also makes sense to form a holding company if it is foreseeable at the time of establishment that the company should be sold again after a few years. Because when selling a capital gain of about 98% can be used for reinvestment purposes.
The advantages of a holding
- Tax savings
Within a holding company, the profits of the subsidiary can be transferred to the holding company at favorable tax rates. 95% of the amount is therefore tax-free. The remaining 5% will then be taxed at the standard rate.
- Liability protection
A holding structure protects assets, provided the profits are transferred to the holding. The parent company is not liable for the subsidiary. If there is a liability case, only the subsidiary can be accessed.
- Risk management
If there are high-risk areas in the company, these could be outsourced to a separate subsidiary. Thus, in the event of damage, only the subsidiary would be liable
- Protection of business assets
The business assets can also be protected by a holding company. If e.g. If a subsidiary is only established for implements or the like, the business assets would be protected if another subsidiary had a liability. For example, Software licenses or machinery could be introduced into a holding company and would therefore be legally segregated from the operating subsidiary.
There is the possibility to run a holding anonymously. This can be advantageous for a variety of reasons, e.g. for price differentiation or for image purposes. Through activated trustees one can reach this anonymity. For outsiders, except for the tax office, it is therefore no longer comprehensible who leads the company.
The biggest mistakes when starting a business abroad
Many agencies and law firms do not advise comprehensively or wrongly. Learn what to look for.
Gravity of the situation
Often, these law firms think foreign companies are half-silk, tax evasion is favored and mailbox companies are the leaders rather than the exception. This is true, however, only in some start-up agencies that do not have the necessary expertise. Self-proclaimed law firms that do not employ tax accountants or lawyers usually set up companies that are unlikely to operate legally. We set up and look after companies that can withstand tax audits and that are legally operated.
Do you have to live in the country where you start a company?
You can set up a company worldwide, as long as the respective country allows you as a foreigner to acquire shares in local companies or to act as a managing director. If this is not the case trustees can be used. For example, Cyprus allows every EU citizen to own and run a business. Nevertheless, trustees can be used for the purpose of identity protection. However, it is important that the management takes place locally, in the country in which the company is to be taxable. In addition, a permanent establishment must be set up. Without these, a major tax offices around the world do not recognize the company and in the worst case would require additional payment of corporate and business taxes plus late payment surcharges. We rent you a real office and set up a permanent establishment that meets all requirements beyond doubt.
Problematic Law firms: Secrecy is not regarded.
Some law firms bind customers with toggle contracts and exert pressure when the customer wants to close his company. If you are a client of a law firm that has established a legally flawed company, they can be blackmailed. Because in the case of a fiscal problem, law firms without a license are not bound by a duty of secrecy.
Migrating to a different law firm
We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. The process of changing law firm is made often difficult on purpose. Therefore, we have developed a principle of trust. If you are not satisfied with us and want to change, you can do that at any time. The necessary documents (resignation letter), you receive from us standardized after founding. You are therefore protected against unexpected costs and you are free at any time to visit another law firm. So far we have not lost any customer to another law firm.
Privacy / Firm Location
Your accounting documents are kept safe with us. In addition, all electronic data is stored encrypted and accessible only by us, which are bound to a professional secrecy. All accounting records are also stored locally only. Neither authorities nor hackers are able to access this data.
There are quite a few locations in the world that do not charge taxes on companies or individuals, or only estimate a very low flat rate tax. But this can rarely be used without corresponding change of residence. If you are a resident of any major country, the relevant double taxation agreement is decisive. Providers who promise otherwise lead them to tax evasion, which in the case of discovery usually punishes severely. We advise against setting up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in your origin country can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous private account no longer exists.
We comply with the following code:
- Legally secure foundations
- No unexpected(hidden) costs
- No false promises
- Finding the right solution by focusing on your requirements
With this strategy, we have been on the market since 2013 and have not disappointed any customer so far. And we prioritize it in keeping that way. We strive to ensure that every client is satisfied and does not take risks with the solutions we provide for them, but only exploits legal opportunities. Starting a company that involves doing real business is more costly than a letterbox company, but it is the only way to save on taxes without risking legal action.
Nachteile einer Holding
Der Veräußerungserlös ist in den Holdinggesellschaften festgesetzt. Sofern der Erlös herausgenommen wird, ist dieser zu besteuern.