The holding company have a lot of benefit that come with it such as:
1. Protection of the Liability
Holding company being protected from any losses incurred by the subsidiaries. In the other word, if the subsidiaries have to gone through a liquidation process, its creditor cannot claim any of their losses from the holding company.
Not only that, as the holding company can own property, intellectual property and equipment of the company, it can become a shield for the subsidiaries in protecting their property if they cannot perform well or become insolvent.
2. Lower Financing Cost
Holding company that have a stable financial strength can easily obtain loans for lower interest rates compared to its subsidiaries companies itself. This is beneficial for the subsidiaries in overcoming the financial crisis or any emergency claim as the holding company can have a loan and distribute the funds to them.
Other than that, a holding company can assist to reduce the amount of tax that the group need to pay as whole. This is because when the holding company files its consolidated tax return, the losses incurred by subsidiaries can be offset against the other subsidiaries companies with the same holding company.
3. Day to Day Management is not required
Holding company can own variety of business regardless of its industries that they are in. it is because of the holding company does not have to involve in the day-to-day management as it will be full manage by the subsidiaries for them. Hence, although they do not have wide range of knowledge in the industries, they can still become their parent company.