Monday August 20, 2012

Bryce W. Morrison on Holding Companies

Posted in: Legal Updates

On July 25, 2012, Bryce Morrison, a partner in the firm’s Taxation Group, presented to a group of colleagues in the law some of the more common reasons for using holding companies. 

In general, a buyer or a seller of a business or a company is well advised to consider whether a holding company can be used in the transaction to reduce the taxes on the transaction or to better structure its financing.  For example, a buyer that is financing the purchase of shares of a company would probably find a holding company useful to reduce the taxes on the money needed to pay the loan.  As well, a seller of shares could possibly use a holding company to reduce the taxes due on the proceeds of the sale of the shares.

The decision to use a holding company is also affected by the additional corporate tax imposed on investment income held in a corporation.  However, in many cases where active business income is earned, holding companies can be effective for removing inactive assets from operating businesses.

“Before finalizing a transaction”, Bryce explained, “business owners should ask their professional advisors if a holding company would be useful in the transaction.”

To learn more regarding the use of holding companies, please contact a lawyer in the firm’s Taxation Group.

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