Why would the operating company's other non-familial shareholders be concerned with your internal family arrangements?
Tax Planning for You and Your Family 2019 by KPMG. p 225.
A holding company is often appropriate where you have family members
involved in your business (perhaps for income splitting purposes), and there
are other shareholders not related to you. If you and your family members
own shares in the holding corporation, and the holding corporation owns all
of your family’s interest in the operating company, the other shareholders
of the operating company need not be concerned with your internal family
arrangements.
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Why would the operating company's other non-familial shareholders be concerned with your internal family arrangements?
When forming a partnership, with other persons, it is recommended that a legal document be drawn up that covers adverse conditions often referred to as "the 5 D's". That is divorce, disinterest, drugs (illegal activity), death, or default (personal credit problems).
Family squabbles tend to accentuate all kinds of adverse behavior in business. Especially when a business founder passes away, and leaves a portion of their business to several heirs. By using a holding company for the family members, non-family members are insulated from the family squabbles. The holding company represents the family as one voice.
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