How to Set Up a Real Estate Holding Company

Holding companies do not exist to create products or provide services. Instead, holding companies own other companies or primary stock in other companies. Holding companies can also own real estate or property such as stocks and trademarks. All of these aspects come together to form a corporate group with subsidiaries as its assets.

In many cases holding companies also have the responsibility of investing money into other companies, and for other companies. These funds are made by selling equity, and then investing either within its own company or into its subsidiary companies. In return, revenue can be accessed via interest, payments from subsidiaries, or even rent.

What is the Purpose of a Holding Company?

Holding companies specifically exist to control other companies. They often own property, patents, even stocks of other assets. The one specific thing that all holding companies have in common is that they typically do not sell products or services. They act specifically in the interest of controlling other companies.

What are the Different Types of Holding Companies?

There are different types of holding companies. If you are creating a holding company you will need to choose which type of holding company you will be. There are 4 different types of holding companies:

  1. Pure
  2. Mixed
  3. Immediate
  4. Intermediate


When a holding company is “Pure,” it means that it only holds stock in other companies. It is a classic type of holding company and will not do any other type of business other than that of controlling other companies.


When a holding company owns stock and control of other firms, but also sells products, or services, it is called a mixed holding company. This can also be named a holding-operating company. If a holding company is mixed and works in an unrelated field, it will be referred to as a conglomerate.


Immediate holding companies control stock in other companies, while also being a subsidiary of another.


Intermediate holding companies are the holding company of one entity, while also are owned by another company. In some cases, an intermediate holding firm will not need to publish its financial records of the subsidiary.

Advantages of Starting a Holding Company

Holding companies are a great way to reduce risk while maintaining ownership. If you are wondering why people prefer to start holding companies, here are 3 key reasons to start a holding company.

Liability Protection

Holding companies are able to limit their liability by using subsidiaries as a liability shield. When a subsidiary encounters debts, they will belong to each individual company, not that of the parent company. The parent company’s assets will be safe from that of creditors.

Control Assets for Less Money

When it comes to controlling a subsidiary company, a parent company is required to hold at least 51% of that subsidiary. This makes it a lot cheaper than purchasing 100% of a company. Instead, it allows business owners to purchase and control multiple entities for less of an investment.

Lower Debt Financing Costs

Although debt financing can be expensive for small or new businesses, using a holding company can help to reduce this. This is because larger or more seasoned companies typically have the ability to obtain loans with low-interest rates. In these cases, a holding company can provide capital at a low rate for its subsidiaries.

Disadvantages of Starting a Holding Company

Holding companies have a lot of advantages but they can be difficult to create and continue to manage. Here are a few of the most common challenges and disadvantages of starting a holding company.


Starting a holding company can be complex. This is one of the largest disadvantages of starting a holding company. As compared to a standard business structure, it can be a lot to keep track of.

In some cases having a good management system can prove to reduce the complexity of a multi-faceted holding company situation. In any case, having good records regarding all aspects of the business can help to reduce the negative impact of complexity.

Compliance Costs

When a holding company is formed, each subsidiary will be required to pay formation fees. This may include annual reports, franchise fees, as well as LLC or corporation fees that are required in the state of formation. By using one single company you can avoid these and the extra costs.

How to Set Up a Holding Company

Starting a holding company from scratch can be an overwhelming process but when you break it down it’s actually pretty simple. To create a holding company you must register the holding company in the state that you live in, as well as providing your business’s name.

You will also need to file all the appropriate paperwork, as well as articles of incorporation, and operating systems. Finally decide on a registered agent, who can be a part of your holding company or a third-party provider.

If you need help setting up a holding company, we can help. We specialize in forming holding companies, LLCs, and corporations and can help you!


Topics, that might interest you:

Creative Financing Avenues

Credit unions are member based organizations that you can join for free. Most credit ...

Learn more

Tax Sale Opportunities

Tax sale event may arise. But for you to really take advantage of these situations ...

Learn more

Types of Mortgage Interest Rates

If you are currently thinking about purchasing a new home, you no doubt have ...

Learn more

Avoiding Foreclosure

If you’re behind on your house payments, you may be in danger of foreclosure. But ...

Learn more

Real Estate Short Sales

Short sales by their very nature are not simple, but the more you know the better advantage ...

Learn more

Handling FSBO Properties

FSBO refers to real estate which is listed for sale by the property owner instead of through a...

Learn more

Adjustable Rate Calculator

Many home buyers prefer adjustable-rate mortgages because the initial interest rate is lower than a...

Learn more

Real Estate Development Risks

There are a lot of potential risks involved in property or real estate dealings. People who are ...

Learn more

Property Inspection Tips

If you are a real estate owner, you know that your property is like a living being, and as such...

Learn more

Selling Your Home

So you have decided to sell. In today’s real estate market you need all the help you can get in...

Learn more

Interest Only Mortgage

Why would one consider a “Smart Choice” (interest only) mortgage loan? Why not rent and save the funds?..

Learn more

Holding Company Taxes

A holding company (also referred to as a parent or umbrella company) is a company devised to house and manage..

Learn more

Land Trust Benefits & Disadvantages

If you own property, you’re likely looking for a simple, legally effective way to maintain your privacy and protect..

Learn more

Using a Holding Company for Privacy

A holding company is a company whose primary function is to acquire and manage other companies..

Learn more

Asset Protection and Real Estate Holding Companies

Real estate is as lucrative as it is risky. If you’re thinking about getting into real estate..

Learn more

Example uses of a Real Estate Holding Company

Real estate holding companies are the best way to protect your personal assets from the..

Learn more

LLC vs. Sole-Proprietorship

Limited liability companies (LLCs) are business structures in the United State...

Learn more

What's a Holding Company Subsidiary

A subsidiary company is a company that’s owned and controlled by another...

Learn more

Holding Company Naming Ideas

There are many parts that encompass forming a company and, in many cases...

Learn more

Holding Company Benefits: Advantages & Disadvantages

Although not a common idea when first starting your business, a holding company is something...

Learn more

How to Set Up a Holding Company

Holding companies do not exist to create products or provide services.

Learn more

Wyoming vs New Mexico: Where to Form Your LLC

When forming a business in the United States there are a few options to choose...

Learn more

What is a S-Corp Holding Company?

Holding companies are similar to other businesses, but instead of offering a product or service...

Learn more

Operating Agreements: What are they & What to Include

When forming an LLC there are a variety of different aspects involved in the formation...

Learn more

Holding Company vs Series LLC: What’s the Difference?

Holding companies are business entities that are formed with the intent of owning another entity...

Learn more

Business Bank Account

In everyday life, most people own a bank account to digitally use their money and protect it from theft...

Learn more

How to Obtain Your Employee Identification Number (EIN)

Separate your business and personal funds, preserve your limited liability...

Learn more

What is a Registered Agent?

Whether you choose to form an LLC or corporation, and no matter which state...

Learn more

Corporation vs LLC: What’s the Difference?

Does your business have a larger customer base? Is there an increased...

Learn more

6 Simple Steps to Form an LLC in Your Area

From liability protection to a favorable pass-through tax status...

Learn more

What are the Benefits of Creating an LLC? Is it Worth it?

The way you choose to legally structure your business impacts...

Learn more

LLC vs Corporation

Both LLCs and corporations are business entities...

Learn more

Land Trust vs Living Trust

A Trust is a contract between the person who creates...

Learn more

Equity Stripping

If you aren't a real estate investor, you may not be...

Learn more