- The world’s richest man has turned to a holding company structure to prevent a succession battle among his heirs.
- LVMH founder Bernard Arnault has transformed his current holding company Agache SE into a limited joint-stock partnership, Agache SCA, with Agache Commandite SAS, a newly formed holding company equally owned by his five heirs.
- The move draws attention to holding companies, like those in Wyoming whilst giving businesses a blueprint to follow.
LVMH founder Bernard Arnault is restructuring his empire to thwart any succession woes among his heirs and the potential weaknesses that such infighting brings. As Bloomberg reports, part of his plan is to ensure the Arnault family retains their considerable power, currently translating to about 48 percent of LVMH’s share capital and 64% of the voting rights. He has achieved this by turning Agache SE into a limited joint-stock partnership, a structure experts say allows a shareholder with a seemingly low holding to wield a significant sway.
There is also a new company Agache Commandite SAS, owned by his five children, all having equal stakes and coming with a five-member board to guarantee the balance of power among the children. The new company can trigger the transition from its 73-year-old company though such a decision and others like significant strategy changes will require unanimous board approval.
The whole LVMH structure and the different holding companies involved, along with the news, demonstrate the potential of a holding company as a financial and business resource. It is also not limited to trillionaires alone but a resource that even small and medium enterprises can take advantage of.
Benefits of forming a holding company LLC
Forming a holding company LLC can offer several benefits for individuals and businesses looking to manage their assets and minimize risk. As indicated here some of the critical advantages of forming a holding company LLC include:
Tax benefits
Individuals and businesses can minimize taxes by forming a holding company LLC. This can be achieved using deductions and credits available to holding companies rather than to individual entities. Further, you have the advantage of moving to a location with a favorable tax regime. It also allows you to enjoy consolidated tax filings. This aspect simplifies filing tax returns as you only need to file one, and it can reduce tax liability.
Limited liability and asset protection
One of the primary benefits of a holding company LLC is that it allows individuals and businesses to isolate risk. By separating assets into different entities, a holding company LLC helps protect assets from losses incurred in operations or other riskier ventures. It is an opportunity to safeguard assets like equipment, real estate, cash, patents, and trademarks.
A holding company LLC provides liability protection to its members. This means that members are not personally liable for the debts or obligations of the holding company. It also provides charging order protection. In case of a lawsuit, it shields the business assets from personal creditors.
Privacy
Forming a holding company, LLC, can provide anonymity, which can help to protect assets and maintain privacy. It allows individuals and businesses to anonymously title assets. In the right state, like Wyoming, information regarding company members is not required and does not go on public record.
Access to capital
Holding companies can also provide subsidiaries with access to the capital they may not have been able to obtain on their own, especially when the venture is considered a risk. They can attract better investors who look at the profile of the holding company and not its subsidiaries. The holding company can also get lower interest on loans compared to subsidiaries.
Diversification
Holding companies offer a way for companies to diversify their operations and reduce their overall risk. By owning and controlling multiple subsidiaries, a holding company can spread its business activities across different industries, which can help to reduce the impact of economic downturns or market fluctuations in a single sector.
Centralized management
A holding company can simplify the management of multiple businesses by centralizing decision-making at the holding company level. This can help to streamline operations and reduce the administrative burden for each subsidiary. Further, a holding company LLC does not require day-to-day management, which can be a significant advantage for individuals and businesses that want to minimize the time and effort needed to manage assets.
In conclusion, a holding company is an essential tool in business. Whether one seeks privacy, lower taxes, or efficient management, one can get it all in a holding company LLC. As the wealthiest man in the world has shown, it is even handy in long-term succession planning.