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For example, one of the most respected blue chip stocks in the world, Johnson & Johnson, is really a holding company.That is, the firm itself, in which you are buying shares when you acquired stock, doesn't actually anything in the sense that people think it does.The parent holding company supports the subsidiaries by lowering the cost of capital due to its overall strength.That is, it can go out, issue bonds at rock-bottom rates, then lend money to its own subsidiaries at rates the subsidiaries couldn't get if they were stand-alone enterprises.Whether you are beginning to invest in securities issued by corporations, such as common stocks, preferred stocks, or corporate bonds, or you are doing case studies on private companies because you are considering investing in your own business, it won't be long before you encounter something known as a holding company.In fact, many of the most successful companies in the world are really holding companies.If you are looking for a more advanced explanation that is suited for wealthy individuals and professional investors, I wrote about this same topic on my personal blog awhile ago in a post called .It gets into more of the asset protection elements of a holding company, such as the ability to isolate valuable intellectual property into so-called "silos", among other topics.

That way, if the firm is sued, Procter & Gamble could never lose the Tide brand name.Then, we issue 1 million shares of stock at per share, raising million in fresh cash. Other than an office, which we will ignore for now for the sake of simplicity, our balance sheet appears as follows: Blue Sky Holding Company, Inc.- Balance Sheet The holding company income statement is going to show 0,000 in operating income (profit before taxes).This basic introduction was designed to help you understand what holding companies are, why they play such a vital role in the modern economy, and some things you might consider before investing in, or forming, one.Please note that this article is designed for beginners.

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