Start-ups and young companies are often faced with the question of the optimal corporate structure.
One option that can offer many advantages is the dual holding structure.
But what exactly is behind it and for which start-ups is such a structure worthwhile?
Choosing the right legal form and corporate structure is of enormous importance, especially in the start-up phase.
It has far-reaching effects on liability, taxes, financing and the future exit.
Many founders are faced with the decision of whether to start directly with the operating company or choose a holding structure.
The dual holding structure in particular is becoming increasingly popular with start-ups.
In my consulting practice, the question of the optimal structure is a key issue.
When planning for my clients, I therefore always ask whether there are current or future investments for which different structures could be relevant.
This is because choosing the right structure can bring decisive advantages, especially when start-ups are raising external capital or seeking an exit.
But does dual holding really make sense and what are the specific advantages?
For whom is the additional effort worthwhile and when is it better to do without it?
This blog post provides a detailed overview of dual holding, how it works and the advantages and disadvantages for start-ups.
Using practical examples, we show in which cases this structure can be a real added value and when other solutions are the better choice.
Find out how you, as a founder, can set the course for the success of your startup right from the start through intelligent structuring.
After all, the right legal form and shareholding structure is one of the most important decisions you make on the way to a successful company.
Read more now about dual holding as a possible solution and find out whether this option could also be interesting for your startup.
What is a dual holding structure?
A dual holding structure consists of several levels of companies that are interconnected: – At the bottom are the operating companies that run the actual business.
These companies are responsible for implementing the business idea and generating sales and profits.
Typically, these are corporations such as GmbHs or GmbH & Co KGs.
– There is also a holding company, often in the form of a GmbH, which holds shares in the operating companies.
This holding company acts as the parent company and bundles the investments in the subsidiaries.
As a rule, it is not operationally active itself, but takes on higher-level tasks such as strategic control, investment management and financing.
– Between the holding GmbH and the shareholders there is also a holding GmbH & Co KG.
This level is important for tax structuring.
The Holding GmbH & Co. KG is a partnership in which the holding GmbH is the general partner and the shareholders are limited partners.
This structure makes it possible to achieve tax advantages such as the avoidance of double taxation of profits.
– First and foremost, the holding shareholders are natural persons who benefit from the profits of the structure.
They hold shares in the holding company GmbH & Co. KG and receive the profits from the operating companies via this company.
By interposing the holding levels, the shareholders can limit their liability and have the profits distributed to them in a tax-optimized manner.
Overall, the dual holding structure enables a clear separation between the operating business and asset management.
It offers scope for flexible structuring of shareholdings and financial flows.
In addition, the tax consequences can be optimized through the clever combination of corporations and partnerships.
However, such a complex structure is also associated with higher costs and administrative effort, so it must be examined on a case-by-case basis whether it makes sense for the company in question.
Advantages of a dual holding company for startups
A dual holding structure can offer some decisive advantages, especially for start-ups: Tax advantages on exit: the biggest advantage lies in the taxation of capital gains.
Within a holding structure, 95% of these are tax-exempt.
Only the remaining 5% is subject to normal taxation of approx. 30%.
This effectively results in a tax burden of only approx. 1.5% on the capital gain.
Without a holding company, a significantly higher tax rate would apply. Capital for reinvestment and investments: The low tax burden means that more funds are available for reinvestment in new projects after an exit or partial exit (e.g. sale of shares to investors).
This is particularly important for start-ups, which often go through several rounds of financing and need the capital for further growth.
The capital in the holding company can also be used for strategic investments or acquisitions. Flexibility with investors: The holding structure makes it easier to take on new investors at a later date.
They can simply invest at the level of the holding GmbH without having to adjust existing shareholdings in the operating companies.
This makes it easier to raise new capital without having to change the structures in the subsidiaries.
The holding company also offers scope for employee or management shareholdings. Limitation of liability: The division into several companies limits the liability risk.
Problems in an operating company do not have a direct impact on the shareholders.
The holding company acts as a buffer and protects the founders’ private assets.
This is an important advantage, especially for risky start-up projects.
Tax advantages in an international context: If the holding company has subsidiaries abroad, profits generated there can be exempt from German taxation under certain conditions.
The departure of shareholders abroad can also be organized without exit taxation.
This can be a decisive advantage for start-ups that want to expand internationally.
However, it should not be forgotten that a holding structure is also associated with more administrative work and higher running costs.
Separate annual financial statements and tax returns must be prepared for the holding company and the subsidiaries.
Establishing and maintaining several companies also incurs costs, e.g. for notaries, the commercial register and tax consultants.
This additional expense must be weighed against the tax and other advantages.
As a rule, however, a holding company is particularly worthwhile for fast-growing, investor-financed start-ups with exit prospects.
For whom is a double holding worthwhile?
A dual holding structure naturally involves a certain amount of effort and costs.
It is therefore particularly worthwhile for start-ups where the following points apply: – An exit is planned in the medium term, e.g. through a sale to an investor.
– Further investors are to be taken on in the future.
– The company should grow and expand in the long term, possibly also internationally.
– High profits and sales proceeds are expected.
A dual holding company can therefore be very interesting, especially for fast-growing technology start-ups with exit prospects.
However, the structure does not have to be fully implemented from the outset.
It often makes sense to build up the holding structure gradually in order to limit the effort and costs at the beginning.
For example, you can start with a simple GmbH and later establish a holding company above it if you want to bring more investors on board.
A GmbH & Co. KG can also be an interesting structure in the blockchain sector, where I often advise.
This is because certain activities often require permits or approvals from supervisory authorities.
With a GmbH & Co. KG, the operational business can be separated from the regulated activities.
Alternatively, you can also consider using a holding structure to spin off certain projects or assets.
For example, patents or IP rights can be transferred to separate companies.
In the event of insolvency of the operating company, these are then protected.
It can also make sense to set up separate project companies under the umbrella of a holding company for risky projects.
However, the exact design of the structure should always be discussed with experts such as tax consultants and lawyers.
This is the only way to tailor the structure to the individual needs of the startup and comply with all legal requirements.
The tax and legal complexity of a holding company should not be underestimated.
However, with the right planning, it can be a valuable tool for start-ups to attract investors, protect assets and enable long-term growth.
