Purchasing or selling a business may seem as simple as transferring assets and ownership from one company to another. However, these transactions can be significantly more complicated than that and may have unexpected civil or tax liability, as well as other costly implications. Holding companies and shell corporations are two tools that can be used to avoid the potential liability of a traditional sale, as well as to ensure anonymity if needed or to facilitate a hostile takeover. An experienced Houston business transactions attorney can identify when a holding company or shell corporation can help you achieve your goals in your sales transaction.
A shell corporation is a business entity that does not have substantial assets or active operations. Generally speaking, a shell corporation is a legal tool used in different business transactions to reduce tax liability, to access financing, to store funds, or to maintain anonymity. On the other hand, a holding company is a parent company – often to many different businesses. A holding company does not engage in the operations of the held companies but instead maintains enough stock to control the held companies. This can reduce risk for owners while still being able to own and control numerous businesses.
Is One of These Tools Right for Your Business?If you are engaged in a business transaction, a skilled attorney can discuss the possible benefits of a holding company or shell corporation in your particular situation. First, you need to decide what your specific objectives for the business transaction are. If your goals require any of the following, a shell corporation may be useful:
- Foreign investments
- Tax havens
- Hostile takeovers
- Temporary fund storage
- Anonymity for public relations or security purposes
- Asset protection from lawsuits
A holding company may help increase management efficiency, centralize expenses and operational control, lower capital costs, better lending rates, and more because of a greater strength of the holding company than the individual subsidiaries.
If your goals include maintaining control over many different companies through a variety of transactions, a holding company will likely be beneficial in many different ways. On the other hand, if your goals involve a single transaction, you may want to divert that transaction through a shell corporation if the purchase is hostile or risky.
There are many mergers and acquisitions that involve neither a shell corporation nor a holding company. However, it is important to have your qualified business lawyer review your situation for any unique circumstances that may require the use of creative legal tools.
Find Out How Our Houston Business Law Firm Can Assist You
Whether you are starting a business, purchasing a business, selling a business, or engaging in regular operations, The Weisblatt Law Firm can assist you. We can help with everyday operational and compliance matters, as well as highly complex mergers and acquisitions that involve tools such as shell corporations or holding companies. We strive to achieve the goals of each and every client and can help companies of all shapes and sizes. Please contact our office for more information about our services at 713-352-0847 today.
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