Understanding What A Holding Company Is
A holding company in Albert is one who’s function is to simply posses assets. They are sometimes referred to as a Holdco. This is in contrast to an operating company that is part of an ongoing business. While from a legal perspective, there is not distinct difference between an operating company and a holding company, there are different reasons as to why you would want to use each. If you require a holding company, the corporate lawyers at Kahane Law Office are able to set them up quickly and for a flat rate. To learn more from our Calgary team, call today 403-225-8810.
Why Use A Holding Company
There are a number of reasons why people use holding companies. Each particular reason is usually based on a person specific reasons or benefits for incorporating. Some of the more common reasons for using a holding company include:
Holding companies for tax planning purposes
Using holding companies is a good idea for may reasons. First, you do not take any income derived from the holding company’s assets as personal income. You may issue funds to you personally as income in years that your employment income is lower or issue dividends. Second, it also allows you to split ownership, income and dividends with a spouse. Third, you may be able to enjoy more tax deduction by using a holdco. Lastly, taxes may be deferred by using a holding company.
Holdco for joint ownership
Using a holdco for joint ownership has its advantages. Paramount is that with a holding company, you can have a unanimous shareholders’ agreement or USA. A USA is a contract between the shareholders. This contract sets out all the agreements between the joint owners. It allows for better control and running of the company. It also sets out what happens if there are problems or if someone wants to sell their share. Setting out all these terms at the beginning can avoid fights and court down the road.
Some people hold their assets in a holding company for liability protection. Because a holding company is not an operating company, there is less likelihood of liability. There are some assets, usually held in holding companies that may be the source of litigation. For example, a rental home may be the location of an accident where the owner is sued. In this case, the amount that a person can recover from the holding company (in the absence of fraud, or other similar activities) are the assets of the holding company. This means that the plaintiff cannot go after the shareholder(s) of the company.
How To Save Money On Holding Companies
As holding companies are not operating, they do not usually deal with the public. Consequently, the name of the company is not usually vital. in order to save money, many people choose to use holding companies that are numbered companies. Numbered companies do not require NUANS searches to determine if a name is already in use. Instead, the Province of Alberta issues numbers sequentially, when we submit the application for the holding company.
Disadvantage Of Holding Companies
The disadvantage of using a holding company is the additional cost associated with setting it up. There are also ongoing costs. The ongoing costs include the annual returns (which our firm can do for you to make it easier) and the cost of preparing your Holdco’s annual tax returns. While these costs may be nominal, you must decide if the benefits outweigh the costs.
Calgary Lawyers To Set Up Your Holding Company
The corporate lawyers at Kahane Law Office in Calgary can incorporate your Alberta holding company. We are usually able to have the compnay set up within one or two business days but are usually able to have them ready same day if required. Call today to learn more 403-225-8810 or email us directly here.