# General Business Category > General Business Forum >  Starting a HOLDINGS Company

## Elijah

Hi All

Need some advice please. How does one go about forming a "HOLDINGS" Company, that is to say. several companies with one of them as the holdings Company.

Thanking you in advance.

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## BusFact

Register a new company with CIPC.

The new company buys the shares in the subsidary companies.

You have a holding company.

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Elijah (22-Aug-12)

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## SSS100

Yes, thats the process per above.
But, be careful...you need to "declare" your a registering a holding company as a holding company does not trade but it own shares in other companies.

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Elijah (22-Aug-12)

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## Petrichor

What is the benefit of regsitering a holdings company? Is there any benefit if shareholding in the child companies are all 100%?

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## BusFact

No obvious benefit. Only thing is if you want to change shareholdings in the future, you only need to change the holding company and there is no need to do several transactions for each subsidary company.

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## Elijah

Thanks for your contribution, BusFact and SSS100.

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## sbongak

Does this mean that each subsidiary needs to be registered? 
Say for example i wanted to start ABC Cleaners, ABC Contractors, ABC Security Services, ABC Designs all belonging to Holding company ABC Holdings. What's the process here?

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## BusFact

There are different ways of doing this:

1) You have one company - a pty ltd which you register at CIPC. Within this company you have "divisions". These are not different companies, but merely informal sections you have divided up - a grouping of products if you will. In much the same way that a Pick n Pay has a deli section, a bakery section, a frozen foods section, etc. You can design different invoices and product literature for each division by using branding. Eg: The invoice details and bank account are in the name of ABC Holdings (the name of the company reg at CIPC), but you stick a bright heading and logo at the top of the page which shows the division's brand name. To the layman it looks like they are dealing with ABC Cleaners, but accountants and businessmen will still see that the actual company is ABC Holdings. This is not a problem, and is necessary so that someone knows who they are contracting with from a legal perspective. This is the cheapest and simplest way, but means that the same shareholders own all parts of the company and if one part fails, it will affect all the others as they are really the same entity.

2) Register each of the sections as a company. ABC Holdings will then be the total or part shareholder in all of the others (subsidiaries). This is more expensive and more admin, but allows for different owners in each section and partly protects the rest of the companies if one fails.

3) Similar to (1), but each section users the term "trading as" (T/A). It used to be quite popular but the Consumer Protection Act and difficulties registering trading names with CIPC has made it less so recently. The impractical part is that getting someone to invoice you as "ABC Holdings (Pty) Ltd T/A ABC Cleaners" can become pedantic and not all accounting packages have enough space to fit the name in properly.

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## sbongak

BusFact. Thank you for the informative response. 
Seems like the right route to take is registering each entity, although it may be time consuming with all the documentation and administration.
So if I wanted to tender with government, I'd have to register each company seperately on the databases?

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## BusFact

That sounds like a lot of hassle. How big is each of these companies? The simplest solution is still to just have one company. Why is it that you want to separate each company/section - the answer to this will indicate which solution is best for you.

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## sbongak

Thanks BusFact
I could think of a number of scenarios.
1.Say, in future, for example you want to offer shares from one your division, ABC Contractors which is a subsidiary of ABC Holdings offers share for partnership with someone with experience or vast knowledge and network in construction. But you don't want them to have any association with ABC Cleaners or ABC IT Solutions.

2. Protection of your other business, should there be a legal dispute

It's quite a lot of administration. If I decide to use just one company for everything, won't it affect records? Cause then it'll be like you forming a new company e.g. ABC Contractors, should I decide to only register that company independently when it's a large company

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## Dave A

Reminder: A *holding* company can only "trade" in the ownership of other registered companies.
This means the short answer to




> Does this mean that each subsidiary needs to be registered?


is *YES*.

You should also bear in mind that each activity of the company needs to fall within its declared scope of activities.

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## BusFact

> You should also bear in mind that each activity of the company needs to fall within its declared scope of activities.


How necessary is this really? Usually we have to fill in our main source of income when doing tax returns for example. But surely there is no requirement to *only* work in a specific industry? 

For example: If we are currently making plastic hats for the entertainment industry, are we really forbidden from now trading in steel hats for the mining industry?

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## PatrickZ

Thank you for this information, I also register a company but I am still deciding on a name, my aim is to have a holding company and later the subsidiaries trading under it. Thus from what I deduce from the discusion above is that I need to declare it with CIPRO?

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## CLIVE-TRIANGLE

A "holding" company is simply a company, no different from any other, that holds shares in other companies. In fact, there isn't really such a thing as a "holding" company.

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## NeilMadd23

So in fact where does one find a holding company to buy in South Africa :?

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## Gav

Hi Everyone. Fortunately i found this post before i asked similar questions and started a whole new thread.

I am a new business owner and have decided to take the opportunity and start my own Tourism business doing day tours, lodge and airport transfers and also to start a tourist information center. I would ideally like to operate all of these as separate entities under one 'holding' company.

So..... Just to clarify from what i have read in this thread... The company that i want to use as the 'holding' company would be (for example) Batman Investments Pty (Ltd). This would be registered with CIPC and have 100 shares which would be split, in my case, 70/30. The subsidiary companies would be XYZ Day Tours, XYZ Transfers and XYZ Tourist Center. These would all need to be registered with CIPC as Pty (Ltd) companies and each would have 100 shares which would then immediately be bought out by Batman Investments Pty (Ltd), so that Batman Investments owns them each outright.

Am i on the right track so far?

If i am, then when it comes to VAT registration and taxes, would / could all three subsidiary companies be using the one VAT number that is registered to Batman Investments? Or, would each company HAVE to have its own VAT number? On the same note, if all three are using the same VAT number, then Batman Investments is paying the tax not each company individually?

Now, if they are all registered on CIPC as separate companies but owned by Batman Investments, they are then essentially stand alone enterprises and do not need to trade under 'Batman Investments Pty (Ltd) trading as XYZ Day Tours.' It could, in theory, just trade as 'XYZ Day Tours.'

I'm sorry if there is some repetition here, but i just want to try and fully understand this process as there is currently a lot of conflicting information on the internet and nothing, bar this thread, has actually helped me to understand it.

I am looking forward to hearing back from you all and getting some much needed clarification.

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## CLIVE-TRIANGLE

> So..... Just to clarify from what i have read in this thread... The company that i want to use as the 'holding' company would be (for example) Batman Investments Pty (Ltd). This would be registered with CIPC and have 100 shares which would be split, in my case, 70/30. The subsidiary companies would be XYZ Day Tours, XYZ Transfers and XYZ Tourist Center. These would all need to be registered with CIPC as Pty (Ltd) companies and each would have 100 shares which would then immediately be bought out by Batman Investments Pty (Ltd), so that Batman Investments owns them each outright.
> 
> Am i on the right track so far?


Yes you are.




> If i am, then when it comes to VAT registration and taxes, would / could all three subsidiary companies be using the one VAT number that is registered to Batman Investments? Or, would each company HAVE to have its own VAT number? On the same note, if all three are using the same VAT number, then Batman Investments is paying the tax not each company individually?


Multiple entities can never share a VAT or Tax number. A single entity with multiple branches could have multiple VAT numbers, but never the other way round.




> Now, if they are all registered on CIPC as separate companies but owned by Batman Investments, they are then essentially stand alone enterprises and do not need to trade under 'Batman Investments Pty (Ltd) trading as XYZ Day Tours.' It could, in theory, just trade as 'XYZ Day Tours.'


Spot on. Actually, they are obliged to trade for themselves; they may not trade under the holding company's name.

A holding company scenario is simply one where you, the shareholder who would normally own the shares in a trading company, is replaced with a company in which you you own the shares, and it owns all or some of the shares in the subsidiary company. The subsidiaries can also own shares in each other and can in fact own some shares in the holding company.

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Gav (19-Oct-15)

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## Gav

Thank you so much for your help with this! I really appreciate it a lot!

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## andrecv

People i have to bud in here ! I registered a pty ltd in June 2015...recently a family started a laundromat service and asked me to partner with him. This business is however not registered and i want to incorporate it into my pty ltd. Help please...

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## BusFact

Basically the current owner will sell the existing business to your pty ltd. You should write down the details of the sale agreement, and then also agree in writing what each of your responsibilities are and what you are entitled to each receive in terms of salary, profits and shares.

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## Bastion

BusFact

So does this mean i can register a company as a holding company and trading with the informal divisions and as they grow and gain their own independence, then i can register the individual division as subsidiaries..?

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## BoonEnterprise

Yes, that is correct. I am company secretary and I can help those who are struggling grapple with the anything related to CIPC.

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## BusFact

> BusFact
> 
> So does this mean i can register a company as a holding company and trading with the informal divisions and as they grow and gain their own independence, then i can register the individual division as subsidiaries..?


I'm maybe being a bit pedantic here, but for clarity, you don't register a "holding" company, you just register a normal company. It becomes known as a holding company if it eventually owns significant shares in other companies.

Otherwise your plan sounds just fine. When it comes to the separation, there may be a number of ways of doing it, some common ones would be:
1) You would register a new company which would then buy any assets from the original mother company, and start trading separately.
2) You would simply start trading in the new company and cease trading in the division of the mother company.

Keep in mind that this will most likely involve new tax numbers, vat numbers, bank accounts and co reg numbers. Invoices will need to be redesigned, supplier and customer credit accounts resigned etc.

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## JulieMiller

Hi guys, this thread was posted a long time ago but hopefully someone is still able to assist.
I would like to check if losses in one company can offset profits in another if both are 100% owned by a holding company?

Or does each company in the group have to submit tax returns separately and pay taxes as stand alone businesses?

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## Andromeda

Hi

The individual companies are taxed, not the group.

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## RedeemedSA

Hi everyone

I recently registered a private company as XYZ Group,just a normal company. Since someone mentioned that you can have divisions in just one company which is a cheaper option, I wanted to know if I can use different trading names and for each division which will serve as brand names and also include it in my invoices that I will be issuing to customers?

I know this thread started 7 years ago but I really need your help as it will cost me dearly to start from the scratch.

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## Andromeda

Hi

Divisions are a quite different to trading names. A company can be comprised of multiple divisions but any communication with other entities must not seek to obscure the relationship.

Normally any documentation will state the registered entity details and then also state the division being dealt with.

Some companies give emphasis to the division, others give emphasis to the company. In your case you probably would want to give emphasis to the division. 

A simple example is an invoice boldly headed "Widget" and in the next line, not as bold, "A division of XYZ Group (Pty) Ltd"

In a nutshell, documentation must explain the relationship, not hide it or misrepresent it.

Also, it is probably worth mentioning that in addition to its income, each division normally has it's own expenses, assets and liabilities.

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## Ozzie

[QUOTE=BusFact;124085]There are different ways of doing this:



2) Register each of the sections as a company. ABC Holdings will then be the total or part shareholder in all of the others (subsidiaries). This is more expensive and more admin, but allows for different owners in each section and partly protects the rest of the companies if one fails.

How exactly is this done at CIPC? When registering the subsidiaries how exactly do they then become part of the holding company? I have opened a Holding company but I am not sure how to go about linking the subsidiaries with the Holding company at the CIPC

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## Andromeda

> How exactly is this done at CIPC? When registering the subsidiaries how exactly do they then become part of the holding company? I have opened a Holding company but I am not sure how to go about linking the subsidiaries with the Holding company at the CIPC


In a nutshell you don't. A company is a holding company simply because it controls another company, usually by means of its shareholding. It could sell it's shares tomorrow and cease being a holding company because it no longer owns shares in a subsidiary.

So in the example you mention, your holding company owns all or a controlling interest in the subsidiary. You now need to prepare individual financial statements for each company as well as consolidated financial statements for the group.

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