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In this week’s Weekly Tax Planning Tip video, JP breaks down the benefits of using a holding company – when we use them and why. If you’re looking to safeguard the assets of your operating company, you’ll want to check this out…

Transcript:

Hey there. So today I want to talk to you about holding companies, what they are and when do we use them.

So simply put, a holding company is a company that owns shares of other companies and it does not operate with the general public.

So, remember we like to incorporate business activities to limit the liability of our personal assets.

Well, we use a holding company kind of in the same manner. So when we see that there’s an operating company with continued net income, uh, it starts to build a retained earnings and cash balance, what we like to do is transfer that balance up to a holding company by way of a dividend. And really the holding company becomes the bank or the financee of the operating company.

We use this to really safeguard the assets of the operating company because the operating company always has a chance of getting sued because it is operating with the general public.

Remember the holding company is just lending money back down to the operating company or it’s lending over to other companies that it owns – we do this for investment opportunities.

So we use a holding company for safeguarding assets of an operating company, and we use it for tax planning purposes.

So I hope, uh, I hope this video helps. And until next time, thanks.