A holding company is best seen as a savings box that keeps corporate profits. Because if a large part of the profits remains in a GmbH to optimize the personal income tax of the shareholders, then the company has a growing wealth at its disposal. Should a liability then occur, the GmbH is liable with its entire assets. Thus, there is a risk that the profit saved will go under. So the holding company takes the profit from the liability shell of the subsidiary in order to preserve the limited liability of the GmbH in practice. When a holding makes sense depends on the amount of the GmbH’s annual profits. In addition, a holding company is also suitable for saving taxes on the sale of the subsidiary GmbH. However, you also have to consider the costs in order to understand when a holding company really makes sense.

Our contributions to holding structures are very popular with our readers and users of our other media. Finally, holding companies offer advantages in many ways. However, there is often also the question of when a holding makes sense.

Indeed, a holding company is an extraordinary construct. Because a holding company is a company that usually does not operate an operational business, but rather holds investments in subsidiaries. In particular, corporate structures that use the legal form of the GmbH are used. Although there are also designs in which a partnership, such as a GmbH & Co. KG, seems more sensible, the GmbH is always in the foreground in connection with holding companies.

In connection with the question of when a holding makes sense, another one also comes along. Because the benefit that a holding company offers also has its price. It should be borne in mind that the holding company, as an independent company, is also subject either directly or indirectly to an annual recurring tax assessment. But since we usually deal with a GmbH as a holding company, there is also a taxation by corporate tax and trade tax for them. In order to prepare the corresponding commercial and tax balance sheets, there are of course also costs. Because the so-called object values affect the level of the costs, they increase with the value of the holding company.

When does a holding make sense – reasons and advantages

But before we talk about the costs associated with a holding company, we want to provide arguments that show when a holding company makes sense. To this end, we would like to start by considering the ideal holding structure as the starting point for our remarks.

2.1 Structure of the holding structure

The ideal of a holding structure provides for a subsidiary and a parent company. Furthermore, both are in the legal form of the GmbH. In addition, the subsidiary is to run a successful operation that generates high profits annually. The parent company, on the other hand, only holds the participation in the subsidiary. It has no business of its own.

Before we explain the advantage of the holding company and reveal when it makes sense, let’s see how a GmbH without a holding structure could fare.

2.2. Risks due to profit carry forward in the GmbH

It is in the nature of the GmbH that it is only responsible for its liability with its own assets. Their shareholders thus enjoy the protection of their private assets. However, if a GmbH generates such high profits that the distribution to the shareholders would lead to a high tax burden and the granting of a maximally advantageous managing director salary hardly provides relief, then the shareholders usually choose the option to leave the profit in the GmbH by shareholder resolution. So you recite it. In this way, the assets of the GmbH grow from year to year. However, if liability arises, then the GmbH is liable with this considerably increased assets, which is included in the profit carry forward. Thus, indirectly, the liability of the shareholders takes place again. After all, it is their profit from previous years that has been carried forward so far that is now lost in the event of liability.

2.3. When does a holding make sense? As a savings box!

Now we come to the main advantage of the holding company. Because the successfully operating operative GmbH can now pay the profit. However, it distributes it to a Holding GmbH instead of to the natural persons who would normally be its shareholders. Thus, the parent company acts as a buffer for the profit generated by the operating subsidiary GmbH. This is why it is often called a savings box.

Thus, the shareholders of the holding company are able to optimize the amount of the profit distribution so that they only have to pay low taxes. For this purpose, they use the opportunity to pay off part of the profit from the holding company tax-optimized via a managing director's salary.

2.4. When does a holding make sense? At company sale

Another advantage of the holding company can be seen if you want to sell operative GmbH. Because then of course there are taxes on the profit. In contrast to the taxation of this profit by a natural person as shareholder, the tax is very advantageous for a holding company. Because only 1.5% of the profit is incurred as capital gains tax.

2.5. When does a holding make sense? When renting out business immovable property

Finally, another example on the question of when a holding makes sense. If the subsidiary intends to move into its own property, it can either purchase or rent it itself. If she buys the property herself, then she has in addition to the operating costs at best the possibility to deduct the depreciation on the acquisition costs tax as operating expenses. However, if it leases the property from the holding company, the holding company has the opportunity to compare the operating costs and depreciation as operating expenses with the co-income. However, the subsidiary can deduct the rent in full as operating expenses. Thus, it minimizes its taxable profit.

Since a holding company is most likely to make sense if it serves as a savings box, it can be concluded that the profits saved in it are also subject to taxation at the level of the holding company. As we have already shown, this tax is particularly favourable. However, the obligation to tax also means that administrative costs are incurred in preparing the necessary tax returns.

Since you bill according to the object values, the costs are slightly higher. One should expect at least EUR 1,000 a year, whereby also further administrative costs and membership fees, for example at the IHK, can be added. For a holding company with assets of several million euros, this can also result in an amount in the order of EUR 10,000 to EUR 15,000 per year.

However, the additional costs should be considered worthwhile. After all, the holding company serves to protect assets. Therefore, the amount of the costs incurred in connection with the taxation of the holding company is only a relatively small proportion of what one risks losing altogether if one has to pay damages in a liability case.

4. When does a holding make sense – Conclusion

Finally, we take stock by deciding when a holding makes sense. In fact, the holding structure is only recommended if a company reaches a size where the profits are so high that they neither flow to the shareholders for tax purposes nor remain in the company. Although the thesaurierung is useful for future purchases or other plans, but other ways can also serve for financing. In addition, the assets should be large enough to justify the costs associated with a holding company.