Managing Multiple Businesses: Pros & Cons of Holding Companies

With the rise of entrepreneurship and the “gig economy”, more and more people in Kansas and Missouri are engaging in multiple business ventures. While this can be extremely profitable, it can also create a complicated web of legal obligations that need to be managed. One option is choosing to form a holding company. 

There are numerous benefits and potential pitfalls of organizing your business interests with a holding company. 

How a Holding Company Can Untangle Your Business Ventures

A holding company, also sometimes known as a “parent company”, is a business entity that owns other business entities. It acts as a parent or umbrella organization for the subsidiary businesses it owns, allowing them to operate under its name if the parent company wishes. It can be used for consolidating different investments and businesses together in order to increase efficiency and organization, while also creating additional layers of liability protection for the members or shareholders of the parent company. The holding company does not actually take part in the daily operations of its subsidiaries; rather, it serves as an owner or manager of such entities. 

To Merge or Not to Merge?

When making the decision whether to bring all your different businesses under one umbrella, the key advantage of creating a holding company is that it can further protect you from liability exposure. Furthermore, it may provide valuable tax savings when business owners are able to take advantage of federal and state tax deductions. However, there are potential drawbacks to consider when deciding if a holding company is appropriate for your needs. Primarily, the complexity of the business structure may make it difficult to manage multiple interests without proper guidance from an experienced lawyer.

Our Business Lawyers Can Help

Creating a holding company can be an effective way for entrepreneurs in Kansas and Missouri to further protect themselves from risk and liability exposure, while also providing continuing between management of their various business interests. However, with this approach comes potential risk. Before making the decision, it’s important to weigh both the pros and cons thoroughly with help from an experienced business lawyer so that you can make an informed decision. Contact Morefield Speicher Bachman to discuss and determine whether a holding company is right for you!