DK konsult

Create holding structure

There may be several benefits to setting up a holding company as the owner of one's operating company in which the actual business takes place

What is a holding company?

A holding company is a company whose primary function is to own ownership interests in one or more other companies. It is not an independent corporate form, but a very ordinary company that today can either be one limited company ( Aps ) or limited company ( A / S ).

Typically, there will be no operation or production in a holding company, and therefore it will not be VAT registered. The holding company will only own ownership interests in one or more operating companies that run the actual business.

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Why create a holding company?

It may seem strange to start a company that only has to own ownership interests in another company that runs the actual business. However, there are several significant benefits to create a holding company.

  1. Tax-free dividends

    If your company wants to pay dividends, it will usually trigger a dividend tax of 27% of the first DKK 50,600 and 42% of dividends above. If, on the other hand, dividends are paid to a holding company, this will be tax-free. By making a dividend payment tax-free from your operating company to your holding company, you can thus secure your company wealth.

    This can be a great advantage as you can channel a profit from the operating company tax-free up to the holding company in this way. There will always be some risk associated with the activities of the operating company, such as the business going down or you being met with a claim for damages. Therefore, if you have channeled previously saved profits into the holding company, this will not be lost if the operating company gets into trouble.

  1. Tax-free divestment

    A holding company will also be a significant advantage if the company is to be sold at some point. If the owner does not have a holding company and sells the company, it means that the owner sells the company as a private individual. This will result in a high tax payable.

    If, on the other hand, the owner has a holding company, it will be the holding company that sells the company, which can be done tax-free. Previously, it was a requirement that the holding company should own at least 10% and have owned the ownership interests for a certain period. However, this is no longer the case and a holding company is thus free to sell ownership interests tax-free. However, this does not apply to listed companies.

    The owner can then decide for himself how the amount from the company sale ( which is now in the holding company ) should be used. The amount can be distributed as dividends, after which it will be taxed or it can be used for reinvestment in other existing or new companies.

  1. Replacement in the ownership circle

    There are many companies where, at some point, it will be relevant to replace the ownership circle. This may be due to discrepancy between the owners, investment from new owners or generation change. In this context too, holding company ( is ) will be an advantage.

    The possibility of receiving tax-free dividends and being able to sell tax-free ( as described under points 1 and 2 ) will facilitate such a replacement of owners. In part, you can slim down the operating company before a sale, so that new owners do not have to pay for saved profits. In addition, it will also be easier if there is a replacement in the ownership circle. Acquisition of a co-owner’s ownership interests will require less liquidity if the buyer wants to be a holding company that can receive dividends tax-free. The seller will also be able to receive the amount from the company sale tax-free to his holding company. In principle, this can only be done if the owners have personal holding companies.

    You may then wonder if there are no disadvantages to holding companies. There was a previous audit obligation for holding companies, which meant increased administrative costs. This was changed a few years back, so it is no longer a requirement. There will still be additional costs associated with establishing the holding company ( see, however, about company capital below ), and some administration by several companies is to be expected. But benefits will usually be greater than the disadvantages.

This is how holding structure can look

Holding companies can either be a single holding company where there are multiple owners, or it can be personal holding companies.

What should I be aware of at a holding company?

When setting up a holding company, there are some things you need to pay special attention to. With a holding structure, this means that you have to manage two companies rather than one. This means that annual reports must be prepared for both companies, as well as foundation costs for both companies . Overall, these “ disadvantages ” are usually offset by all the benefits of holding company.

How do I set up a holding company? 

Once you have chosen to create a company – – whether this is a limited company or a limited company – it is a clear advantage to set up a holding company simultaneously. If you set up the holding company later, it may be associated with tax matters unless you make a tax-free exchange of ownership interests.

In addition, if you create the holding company simultaneously with the operating company, you gain the advantage that the share capital can be used twice “. Thus, you do not have to pay full company capital for both companies. In practical terms, you as the owner will start the holding company first, where the share capital is deposited. After that, the holding company will then set up the operating company with the same company capital. The operating company will then have the total company capital, while the holding company will have ownership interests in the operating company that will have the same value as the contributed company capital.

In practical terms, this means that you first start your holding company where you are the owner. You must state the purpose of your holding company just as with all other companies. The purpose of a holding company will typically have the following wording “ The company’s purpose is to hold ownership interests in other companies as well as other related investments according to the management’s specification ”. You must then start the operating company and the holding company must now be stated as owner. 

The operating company must have a purpose clause describing the business that the company is to operate. You can also choose the standard provision recommended by the Danish Business Authority, which applies to the vast majority of operating companies: “ The company’s purpose is to conduct business with trade and service as well as related activities ”.

Once you have established both the holding company and the operating company, your holding structure will be established.

Create a holding company with DKkonsult

Whether your company / holding company is a limited company or a limited company, it is easy to make the foundation documentation with DKkonsult yourself. Simply fill out our form, pay for the documents and then they are ready to be signed and dated by the owner or owners. In order for the company to become valid, it must be registered online with the Danish Business Authority ( Virk.dk ) – this will enable the DKkonsult for you.

Once the registration is complete, you will receive a CVR number for the company (s) and you can start running your business.

Then click ‘ Create holding company now ’ below and get started today!

Create holding company now