Advanced stage entrepreneurs incorporate from a holding structure in order to be able to expand or divest their business when necessary using their holding assets, which can be deployed as they see fit, and to build up assets in a tax-advantaged manner.
Start-ups use holding structures when they have a clear growth plan with the likely option of a (full or partial) exit.
The founding motives can be of different nature. Most holding company start-ups are motivated as follows:
Tax motives: enormous tax advantages can be achieved by establishing a holding structure – even for smaller companies with permanent development plans. For example, a subsidiary can pass on its operating profits to the parent company with significant tax relief (95% savings).
Risk-minimizing motives: By splitting operations into several subsidiaries, the overall entrepreneurial risk is minimized. If a business model or division gets into financial difficulties, for example due to a claim for damages, the respective subsidiary can be dissolved through insolvency without affecting the rest of the holding company.
Image benefits: A holding structure communicates to your business partners a well thought-out entrepreneurial culture geared towards long-term entrepreneurship.
In principle, a holding formation always makes sense if a person plans to form more than one GmbH or UG.