Every one of us naturally wants our own business that will provide us with a sense of individuality and a sizable profit margin each year. However, some of the businesses dominate other businesses and play a crucial role in the corporate world.
A holding corporation is that kind of organization. These companies hold dominant ownership in a number of other companies. It may be the owner of subsidiaries and other ventures’ assets. So, if you think you might be able tosetting up a holding company in Singapore, please accept our warmest welcome to our blog for today.
Today, in this blog, we will go over key elements of a holding company that can help you get your thoughts straight if you want to start one. So stick with us and read on.
Types of Holding Companies in Singapore
Holding ventures are classified into two types, these are –
Investment Holding Company- The typical practice for businesses is to provide customers with products or services. Some businesses, however, generate money by investing in bonds, shares, stocks, and real estate even when they don’t have any goods or services to provide. Interest, rental income, dividends, and stock income will all contribute to their revenue. There are no financial areas in which this is involved.
- The foundation of this type of holding company is primarily made up of three ideas: long-term investments, non-trade revenue, and deductive expenses.
- It goes without saying that these ventures desire to hang onto their money for a long time in order to reap the greatest rewards in the end.
- These businesses are eligible for tax breaks if they deduct the direct expenses, regulatory expenses (audit, tax filing, and bank-related charges), and some operating expenses.
Financial Holding Company- Companies that engage in the banking, financial, and insurance industries can be found in this type of endeavor. It can occasionally become the controlling entity of a financial group with at least one subsidiary that is registered in Singapore as a licensed insurance or banking business.
- It oversees a sub-group of a major financial field.
- Owns a minimum of 50% or more capital in its subsidiary.
- Earned at least 50% of revenue from the subsidiary venture.
- It includes an experienced auditor to maintain the entire financial and business activities on behalf of the financial holding venture.
What Are The Benefits Of A Holding Company?
If you are potential enough and want to a holding venture as a starting business in Singapore, then you must know about what benefits you will get from it. Below we have listed some of them. Let’s check them out.
Protection of Assets
One of the greatest advantages of setting up a holding company in Singapore is it will protect your assets whatever the situation is. A holding venture is considered a separate legal entity from the subsidiaries. Suppose company A is the holding company and B company is its subsidiary. So, now B’s asset is owned by A because this is the parent venture.
Naturally, the asset will not be counted as B. Therefore, in the future, if the B entity will take any kind of credit from others, there will be no harm to their assets, because it is safe with the holding or parent company A. So, it is now clear that the assets when it is held by the holding business, it is absolutely safer from creditors of the subsidiary. There is no risk of losing it.
Corporation Tax Exemptions
Any kind of business, whether it is a pro or a newbie must want to pay a minimum tax fee without paying any kind of penalties. Similarly here, if you want to launch a holding business as a starting business in Singapore, then as a subsidiary you have to pay dividends to your holding/parent company. This is a huge profit for the trading company.
This is held by the parent company and it will either invest again or be distributed among the shareholders. Therefore, if you are willing to start a venture in Singapore with a holding entity then you have to tax only for one time. Dividends will not be taxed.
It is absolutely needless to say that a company is run by an efficient line of management. From tracking everyday accounts to clearing paystubs, without an obedient management team it is simply not possible. But when you are doing business under a parent or holding company, then you might think that the entire process will change. That’s not true. When you are running a subsidiary venture then you will also be able to streamline the entire management work.
An independent venture definitely has its personal managing lineup. But with the parent company, it will also give advantages to the subsidiary entity. Directors and other management personnel who work from the parent company’s side will also handle the board lineup of subsidiaries. They will continue all the operations on behalf of the subsidiaries when the situation calls for it. This will give superior work flexibility to the subsidiary venture to work with a parent company.
Operating entities are naturally separate and for this reason, there are fewer risk factors that can be found in investing there. Sometimes investing in startups seems risky. But when a venture is taken care of by a parent company then there is a chance of innovation. It is quite obvious because when we are under someone’s guidance we will act more precisely. From there new ideas to run a venture will generate.
For this reason, we can see innovation to operate the business. So, a company can get new ways of investment and this will surely generate more revenue by applying completely distinct ideas. Therefore, if you are in favor for starting a business in Singapore with a parent company then you can absolutely go for it because it will foster innovation with a huge profit scale after a specific time.
Want to setting up a holding company in Singapore but don’t know about the financial advantages of it? Well, it will give you immense enjoyment after knowing it. A parent or a holding entity is potential enough, that’s why they became investors or own assets of different subsidiaries. They hold a strong financial background than the subsidiaries. For this reason, they will easily get business loans if they apply for them.
Not only that, they will acquire it at a lower rate. Here, the subsidiary venture can get benefit from it. After securing the loan, the parent venture will distribute the amount into distinct subsidiaries. With the help of this, these companies can smoothly run their business without facing any kind of financial troubles.
Some Closing Remarks
A holding company offers a host of benefits to organizations. We covered all the facts required to comprehend a holding company, its types, and the benefits of it. Reread everything before making a decision, do some market research, consult with an expert, and keep your financial situation in mind. So that always think above points before setting up any company.