A holding company refers to a company that controls a certain company by holding a certain number of shares in the company.

Holding companies are divided into pure holding companies and mixed holding companies according to their holding methods. A pure holding company refers to a company that does not directly engage in production and business activities, but owns all or part of the equity of other companies or enterprises. In addition to capital operations through holding, mixed holding companies also engage in some production and operation businesses. The holding company not only has financial control over the subsidiary, but also has operational control. This is also called a parent-subsidiary system.

Advantages of a holding company

1. It can use less capital to carry out more extensive control.

2. The purpose of control can be achieved in a short period of time. Because it is much easier and faster for a holding company to buy shares of an existing company than to create a new one.

3. You can make use of the business results that existing companies have achieved. Such as the market that has been developed and various business contacts, the signboards and trademarks that have been accepted by the public, the company's reputation, etc., thereby avoiding various difficulties in starting a business.

4. It can reduce operational risks. Since the investment of a share-holding company is dispersed across many enterprises, the operating quality and profitability of the enterprise can often be equalized, thereby ensuring relatively stable profits, which is much safer than investing in and operating a certain enterprise alone.