A holding company is a company that lawfully holds (owns) shares in other companies. Typically, it is an LLC or LP that owns enough equity interest in another company to control and manage its operations and profits. A holding company as such is often only used to control other corporate structures: it may be a corporation, LP or LLC rather than producing its own goods or providing services. Holding companies can also be used to own some form of property. Equity is often used as the owner of real estate, intellectual property rights, stocks and other assets. If a company is wholly owned by a holding company, it is called a subsidiary.

Purpose of a holding company
An advantage of a holding company is that the assets of the holding company are very well protected against losses, claims and other risks. In the event that one of the companies becomes insolvent, the holding structure will result in a loss of capital and a reduction in net assets overall. However, the bankrupt company's creditors cannot claim any of the holding company's assets as part of the litigation. Thus, a large corporate structure may be organized in the form of a holding company with only one subsidiary to own its intellectual property, or alternatively to own real estate, or to own equipment or franchise businesses. By building such a complex, multi-layered holding structure, each subsidiary bears quite limited financial and legal responsibilities alongside the parent company itself, making it a good asset protection solution. Tax liability can also be reduced by creating a holding company structure, which can be achieved by incorporating some parts of the company into jurisdictions with reduced or exempt taxes.

Shareholdings also allow private individuals to protect their income or assets. Instead of personally owning assets and taking full responsibility for one's debts, potential litigation, and other risk factors, a holding structure can instead hold the assets, putting only the holding company's assets at risk.

One of the main tasks of a holding company is to oversee the subsidiaries it owns. It can hire and fire employees as needed, but the executives of the subsidiaries are independently held accountable for their decisions. Even though the parent company is not responsible for the day-to-day operations of the subsidiaries, the holding company should have a picture of what is going on and how these subsidiaries are operating in order to evaluate performance and financials.

Benefits of having a holding structure
In addition to everything previously mentioned, there are other major benefits of having a holding structure.

Full operational control over all subsidiaries:

A holding company has full supervision and control over directors’ board of the subsidiary. Parent company has the authority recruit staff, including directors.
Can be used to own property:

A holding company can hold different types of property, including, but not limited to real estate and intellectual property rights as well as other assets.
A holding company can not only hold, but also utilize and even pledge it’s property as well as invest it.
Risk minimization:

Holdings are often used to own assets, thus usually such structures are owners of numerous valuable assets. Holding corporate structure provides legal opportunity to protect these assets from claims, damages, lawsuits and other risks.
Holdings can be organized in several different ways. This allows quite flexible asset distribution between all subsidiaries.
Holdings company can own and use property:

Putting your company’s intellectual property rights or any other assets into a holding structure may be very beneficial in terms of legal protection against potential risks.
Flexibility of participation in risky investment projects:

A holding company participating in high-risk investment projects can protect shareholders of a daughter company.
Board of directors of each of the companies must act in the best interests of their company:

The parent company and its subsidiaries are recognized as separate legal entities each, each having separate board of directors. The board of directors is liable for the company’s activities as well as they are bound to act in the best interests of the represented business.
Tax planning solution:

The holding structure may be set up entirely in a different jurisdiction, which offers decreased or exempted taxes.
The holding can be quite a beneficial structure, especially considering that it often has lower tax rates than a trust would usually have applied.