Holding company

A holding company is a CORPORATION that owns other companies or corporations. Holding companies typically own stock in or otherwise exercise managerial control over the companies they own; their controlling interest is usually at least 50 percent. For tax reasons, individuals sometimes create personal holding companies for their investments. Holding companies are often created to separate a corporation’s regulated and unregulated industries. For example, most PUBLIC UTILITIES in the United States are owned by holding companies. The utility part (an electrical or water supply company) operates as a regulated MONOPOLY, while the land development or other INVESTMENT part of the business operates as a regular corporation. Beginning in the 1960s, many U.S. banks created holding companies, which allowed them to expand over state lines and bypass laws limiting the number of bank branches allowed. Like utility companies, banks could also diversify into nonbanking activities, and holding-company status reduced some types of tax liability.