Holding Company
A holding company is an organization that contains other companies called subsidiaries. The company must present consolidated financial statements to its investors and the Securities and Exchange Commission. Its managers and Board of Directors generally maintain control of the subsidiaries. In the United States, a holding company must hold greater than 80 percent of the shareholders' voting rights in order to receive any tax benefits.
Parent Company
A parent company, by definition, is virtually the same as a holding company. Parent companies usually acquire subsidiaries either through mergers or through acquisitions. Many companies buy out other, smaller companies in order to alleviate competition, broaden their operations, increase their net operating income or receive greater tax benefits. Buying a related organization can reduce the expenses associated with the production of certain items. The subsidiaries also benefit by reducing expenses or increasing sources of funding through affiliation with a larger firm.
Personal Holding Company
According to the U.S. Code, a personal holding company is a corporation not owned by more than five people whose income derives from the ownership of certain property or investments. This type of income includes rent, royalties, dividends and interest. Personal holding companies cannot include life insurance companies, tax-exempt corporations, surety companies, foreign corporations or most finance and lending institutions.
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