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Found a holding company: This is how you proceed - step by step

There are various legal forms to choose from for the company formation a company formation in Germany. This includes the so-called holding company. In this article, you will learn everything you need to know about the company formation of a holding company on the topics of

• Prerequisites
• Advantages and disadvantages
• Costs & taxes

you need to know.nullWe also provide you with easy-to-understand step-by-step instructions so that you can set up your holding company quickly and with legal certainty.nullFounding a holding company - the most important facts at a glance

• Advantages and disadvantages of a holding company
• Requirements for holding company formation
• Duration & costs
• Founding a holding company step by step
• company formation of a holding company: Frequently asked questions

What is a holding company?

A holding company is not a corporate form, but a corporate structure.
This structure can look like the following, for example:null1. the parent company, also known as the holding company
2. the subsidiarynullThe parent company, which is founded by natural persons, acts as a shareholder for the subsidiary(ies). The parent company must at all times hold shares in the subsidiaries and the majority of voting rights.

When does the holding company model make particular sense?

An organizational structure such as a holding company is particularly useful if profits generated are to be reinvested at holding company level.

What forms of holding company are there?

There are different holding variants:

• Operative holding company: The parent company takes over the entire operating business. The subsidiary(ies) only act as branches.
• Financial holding company: The parent company does not assume any operational tasks, but the holding structure is used for asset management.
• Management holding company: The parent company only takes on administrative and controlling tasks, such as personnel management and cash flow management.
• Organizational/structural holding company: The company is divided into different departments. This makes sense when outsourcing high-risk business areas to subsidiaries.
• Investment holding company: The parent company assumes the role of shareholder only, while the subsidiary takes care of the operational business. This offers tax advantages in particular.

Setting up a holding company - requirements

You need at least two companies in the form of corporations. The following constellations are conceivable for the company formation of a holding company:

• you found at least two new companies or
• you establish a new company and incorporate at least one existing company into the holding structure or
• you develop the holding structure exclusively from existing companies

In principle, any corporation can establish a holding company, such as a stock corporation, limited company, GmbH or UG haftungsbeschränkt. The relevant requirements apply here. Not all companies within a holding structure have to have the same legal form, mixing is permitted.

Setting up a German holding company - a brief overview of the steps involved

This is how you set up a holding company with two start-ups:

1. Making fundamental decisions
2. company formation of the parent company in accordance with the rules of the respective corporate form
3. company formation of the subsidiary in accordance with the rules of the respective company form. You appoint the parent company as a shareholder of the subsidiary and have it hold shares in the subsidiary.

Costs for the company formation of a holding company

As both the parent company and all subsidiaries must be corporations, sufficient share capital must be included in the calculation for the company formation . The exact costs depend on the respective legal form of the companies, whereby the company formation of a holding structure with two UGs is the cheapest. You will incur different costs for the company formation of corporations. The total costs are made up of notary and legal fees, as well as the costs for the registry court. In addition, there are the fees for business registration after company formation.

Establish a holding company: Duration of the company formation

It usually takes 5-6 weeks to set up a holding company - in some cases even 8 to 10 weeks. The actual duration depends on various factors:

• How quickly can the founder and notary find an appointment?
• Does the notary want to arrange two separate appointments for the company formation of the parent company and the subsidiary?
• Was the business account opened on time?
• Will the desired company name be accepted by the local court?

If you want to set up a holding company quickly, you should carry out the individual formation steps in parallel rather than one after the other. With Recht 24/7 , it is possible to company formation within 24 hours.

Advantages and disadvantages of a holding company

As with the company formation other types of companies, there are advantages and disadvantages to organizing a company structure as a holding company.nullAdvantages:

• Tax savings: 95% of the profits transferred from the subsidiary to the parent company are tax-exempt. The remaining 5 percent is taxed according to the usual rules.
• Protection in the event of liability: The parent company is generally not liable for its subsidiaries. In the event of insolvency, the entrepreneurial assets of the parent company can therefore no longer be used if the profits of the subsidiary were previously sold to it.
• Protection of the company's physical assets: A subsidiary can also be set up as a "holding company" for more expensive purchases (vehicle fleet, technology, furniture). In the event of imminent insolvency of another subsidiary, these assets are protected.

Disadvantages:

• Additional expenses for bookkeeping and annual financial statements
• As a result: relatively high organizational and administrative effort

How to set up a holding company - instructions in 5 steps

Now you know the advantages and disadvantages of company formation a holding company, how long it takes and what costs are involved, you are faced with the question: "How do I set up a holding company?". In the following, we explain the steps in detail and tell you what you need to pay attention to.

Step 1: Make basic decisions

The first thing you need to do is deal with the basic aspects of your holding company. This includes all the basic decisions associated with a corporation (such as the company formation of a UG), but also the decision as to how the holding company should be structured and whether this form of organization makes sense for you. You should also decide which organizational form your holding company should follow.

Step 2: Establish/determine parent company

You must either set up your parent company according to the rules for the respective corporation (as shown for the UG, for example) or designate an existing company as the parent company.

Step 3: Establish/determine subsidiary

The same procedure as for the parent company is also required for the subsidiary.

Step 4: Appoint parent company as shareholder of the subsidiary

This and the next step must be carried out at the notary's office.

Step 5: Overwriting the shares

When transferring the shares, you can transfer at least 10% and a maximum of 100% of the shares to the parent company. A minimum of 15% is recommended, as this is where all the tax advantages of a holding company come into play.

What are the tax advantages of a holding company?

Profit distribution - tax advantages for dividends

Depending on the size of the holding company's stake, there are tax advantages for the distribution of dividends by the subsidiaries. The dividends distributed are 95% tax-free for the holding company if the parent company holds at least 15% of the subsidiary. Only the remaining 5% is subject to trade tax and corporation tax (including solidarity surcharge). Together, these amount to approx. 30%, resulting in a total tax burden of 1.5% to 2%.

Capital gain - tax benefits on the sale of a subsidiary

If a subordinate company of the holding company is sold, 95% of the resulting profit is also tax-free after seven years (decreasing each year). Here too, the remaining 5% is taxed at approx. 30%, resulting in a total tax burden of approx. 1.5%. The amount of the holding company's stake in the relevant subsidiary is irrelevant here. However, a direct payment to natural persons would lead to comparatively high tax deductions.

You pay these taxes for the holding company

A holding company and its subsidiaries are taxed according to their legal form. The most common taxes include

• Corporation tax: 15% on the profits generated (incl. solidarity surcharge of 5.5%), payable quarterly in advance
• Trade tax: Amount varies from municipality to municipality, the tax-free amount is 24,500.00 euros
• VAT: 19 percent on all invoice amounts (7 percent for products or services for basic needs, such as food)

Founding a holding company: What about the liability of the holding company?

The holding company has the advantage of private release from liability. This means that as the founder of a holding structure, you are neither liable with your private assets nor with the assets of the holding parent company. You are also not privately liable for the parent company's liabilities. The prerequisite for this is that the entrepreneur manages the holding company correctly, e.g. there is no delay in filing for insolvency. Only in such or similar exceptional cases can the entrepreneur be liable with his private assets. In the event of insolvency, the shareholders therefore only have to fear the loss of their contribution.
However, this liability only applies if the parent company has already been entered in the commercial register. If liabilities have already arisen before registration, both shareholders and managing directors can be held personally liable. For this reason, major purchases and contracts should only be made after the final entry in the commercial register.

Founding a holding company - done quickly with Recht 24/7

Before you can set up a holding company, many requirements must be met, which we have summarized above. There are legal pitfalls to be aware of that are often overlooked by inexperienced founders.nullWith Recht 24/7 , you can set up your holding structure quickly and with legal certainty. Our experienced lawyers will provide you with advice and support throughout the entire formation process.