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A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. [1] A holding company usually does not produce goods or services itself. Its purpose is to own stock of other companies to form a corporate group .
A corporate group, company group or business group, also formally known as a group of companies, is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. [1] [2] These types of groups are often managed by an account manager.
holding company; subsidiary company; sole proprietorship; charitable incorporated organisation (UK) reciprocal inter-insurance exchange; However, the regulations governing particular types of entities, even those described as roughly equivalent, differ from jurisdiction to jurisdiction.
The holding company oversees its subsidiaries without offering products or services of its own. A bank holding company, in particular, has a controlling interest in one or more banks.
Diversification results in a reduction of investment risk. A downturn suffered by one subsidiary, for instance, can be counterbalanced by stability, or even expansion, in another division. For example, if Berkshire Hathaway's construction materials business has a good year, the profit might be offset by a bad year in its insurance business.
If one company owns a majority in another company, then the first company is deemed to exert a controlling influence. [1] The parent company is then liable for any damage which results from the interference of the parent company in the subsidiary, which is judged on a case-by-case basis. [4]
A subsidiary, subsidiary company, or daughter company [1] [2] [3] is a company completely or partially owned or controlled by another company, called the parent company or holding company, which has legal and financial control over the subsidiary company.
A conglomerate is a combination of multiple business entities operating in entirely different industries under one corporate group, usually involving a parent company and many subsidiaries. Conglomerates are typically large and multinational corporations that manage diverse business operations across various sectors.