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Holding Companies

Definition

A holding company is a type of firm that owns other investments, including whole companies, instead of engaging in its own operations.

Analogy

Think of a holding company as a backpack. The backpack doesn’t do much on its own, but it holds all your important stuff (like books, pens, laptop) just as a holding company holds ownership in various businesses.

Related terms

Subsidiary Company: This is a company that is completely or partly owned and wholly controlled by another company. The owner is usually referred to as parent company or holding company. It’s like having smaller notebooks inside your backpack for different subjects.

Parent Company: A corporation that has control over other companies with enough voting stock. In our analogy, this would be you - you're controlling what goes into your backpack (the holding company).

Conglomerate: This refers to a large corporation formed by merging firms from unrelated industries under one corporate umbrella. Imagine if you had not only school supplies in your backpack but also cooking utensils, sports equipment etc., because you wanted to have control over many different areas.