A holding company is the union of at least two companies, around a parent company (called "holding company") holding all or part of the capital of the subsidiary (called "subsidiary"). It allows to group several partners wishing to take part in the operation of several activities.

We generally distinguish between holding companies whose activity is limited to holding shares in their subsidiaries (passive holding companies) and those that provide services to help them function well (active holding companies).

Organizing your assets this way can help you get many benefits when it comes to passing them on, making the most of your taxes, and keeping control of what you own.

What are the necessary steps?

Creating a holding company is almost like creating a regular company, although its corporate purpose must specifically mention that it's intended to hold shares in other companies.

The first step is to choose your legal status. There are no particular constraints, and it is possible to opt for a SA, SAS or SARL, as long as it is subject to corporate income tax.

The SAS is often preferred because the dividends it pays are not subject to social security contributions.

As for a classic company, it is necessary to draw up complete articles of association, then to publish a notice of creation in a legal announcement journal approved. The complete file can then be filed with the Registry of the Commercial Court competent according to the location of the registered office of your company.

You can then create it directly by contributing securities from other companies, whether they come from another individual or legal entity. It is common to quickly proceed with the partial or total purchase of securities of another company after the creation of a holding company.

To avoid any suspicion of abuse of rights, make sure to assign a real role to your holding company, other than just tax optimization. The help of an accountant, a lawyer, or a wealth advisor can be invaluable in putting together your financial package in the best conditions.

What regulatory requirements must be fulfilled?

If you want to build a "bottom-up" holding company – that is, by bringing new assets to the holding company through the acquisition of capital from another company – you'll need to appoint a contributions auditor.

To create a "top-down" holding company, i.e. when several partners contribute their capital to form the holding company's share capital, a contribution agreement must be drawn up.

Again, it's generally recommended to get a professional to write it for you.

If you decide to sell your capital after contributing it, at least 50% of the proceeds from the sale must be reinvested in one or more other companies.

If not, you risk a tax reassessment for abuse of rights.

What are the advantages of a holding company?

  • Tax advantages:

Setting up a holding company allows you to benefit from several significant tax advantages. The parent-subsidiary regime allows the parent company to be 95% exempt from tax on the amount of participation products it receives from its subsidiary.

If the parent company owns at least 95% of its subsidiary's capital, tax consolidation allows the taxation of the parent company and its subsidiary to be combined.

This makes it easier to offset losses from some companies with profits from others. Plus, dividends paid by subsidiaries to the parent company are completely tax-free.

  • Legal advantages:

The holding company structure makes it easy to add new partners without losing control of your group. For example, you can give up to 49% of the shares of the parent company and each of your subsidiaries to other investors while still having the majority vote in decision-making.

Also, it is possible to pool the functions necessary for the operation of each company, such as the accounting or financial department for example.

Setting up a holding company must imperatively respond to genuine project financing, other than that of making tax savings. Otherwise, the beneficiaries of the arrangement may be subject to tax reassessment.

Setting up a holding company can be a smart move in many situations for tax and financial benefits, and to help optimize your assets.