Ask James Phipson: What are the benefits of setting up a holding company
Why Every Growing UK Business Should Consider a Holding Company
As a business owner in the UK, understanding the structure of your company can be crucial for its growth and protection. James Phipson, Founder and Head of Advisory at Dragon Argent offers insights into the importance of establishing a Holding Company and explains why it could be a game-changer for your business.
The Structure of Your Business: Assets and Liabilities
Your business comprises two essential components: assets and liabilities.
Assets include everything valuable you own and want to protect
Liabilities encompass obligations and potential risks, such as employee lawsuits, supplier disputes, or business failures.
When assets and liabilities coexist within a single company, any adverse event can jeopardize everything you’ve worked for. Imagine your entire business as a house; if that house catches fire, you lose everything inside.
The Solution: Establishing a Holding Company
James advise is to set up a Holding Company alongside an operating company. Here’s how it works:
Holding Company: This entity holds all your valuable assets.
Operating Company: This entity manages the day-to-day operations, including all staff, financial commitments, and liabilities.
By separating assets and liabilities, if your operating company faces financial trouble, your assets remain secure within the Holding Company. This structure effectively "firewalls" your most valuable possessions from risks that could diminish their value.
Benefits of a Holding Company Structure
Asset Protection: Your assets are safeguarded from operational risks and liabilities.
Scalability: As your business grows, you can establish multiple operating companies. For instance, you could have separate entities for the UK, the US, the EU, and Australia. This approach allows you to manage and potentially sell off different parts of your business independently without restructuring the entire company.
Cost Efficiency: Setting up a Holding Company from the start is cost-effective. Group accounts cost only slightly more than independent accounts, and the legal setup is relatively inexpensive, typically just the cost of an additional company.
Timing is Crucial: Implementing this structure early on is not only affordable but also straightforward. Delaying the setup can lead to increased complexity and expenses, requiring sophisticated shareholder consents and potentially complicated legal processes.
Get Expert Advice
To ensure you establish your Holding Company correctly and maximise its benefits, consult with one of our business advisor and legal experts at Dragon Argent. Setting up the right structure from the beginning can save you significant time, money, and stress in the future.
By considering a Holding Company, you can protect your assets, manage your liabilities effectively, and position your business for sustainable growth and success in the UK and beyond.
Founder, Chairman & Head of Advisory
About James Phipson
James specialises in corporate governance, corporate finance and international development. Alongside his role at Dragon Argent he volunteers as a Commander in the City of London Police, where he is responsible for all volunteering, and speaks nationally and internationally on corporate governance and structures.
