We’ve covered a lot in these past few blogs, so now it’s time for something LinkedIn seems to love… a takeaway list!
When your business needs an organizational overhaul, it may feel like your life really needs one. One natural decision you might face is splitting your assets (equipment, buildings) into a separate company from your money-making machine (the actual business). But is this fancy footwork really necessary to streamline your personal and professional life? Over the past few blogs, we hope you’ve come a little closer to answering that question.
We’ve explored the pros, the cons, the ups, and the downs. Now it’s time to let you decide, and work on the perfect heavy equipment lease to power your business without taking away from your cash flow.
The Pros of a Holding Company
One final metaphor to send us off.
It may sound strange, but imagine your business as a quirky live-in uncle. Let’s call him Frank. Now, think about how you might share an apartment with that person. On one hand, Frank (the operating company) pays the rent. On the other, he creates liabilities regarding your furniture (assets). He gets sloppy when it comes to dipping sauces.
A holding company is like putting that cool couch you inherited in a separate name, just in case there's a pizza-related accident. Plus, you just know he was eyeing that couch up in the will.
The Advantages of a Holding Company
- If someone sues your business, they can't necessarily snag your fancy equipment or building. It's like keeping your prized comic book collection safe from a roommate's messy habits.
- Are you thinking of expanding or selling a part of your business? Having a holding company with everything organized can make things smoother.
There might be some tax advantages, but this is where things get too technical for us to weigh in personally. Think of it like figuring out laundry day rules with your uncle—it's best to consult a neutral third party (accountant) to avoid any arguments.
The Creditor Conundrum
In the benefits article, you may have thought the upsides of a holding company sounded too good to be true. Well…
While a holding company can shield assets from certain operational risks, it doesn't necessarily protect your business from all creditor risks. Most creditors require the holding company to be part of the loan guarantee package. So, unless your operating company can stand financially or you operate debt-free (congratulations!), the creditor risk separation might be a trickier plane to land than some initially think.
The Disadvantages of a Holding Company for Leasing
- Maintaining two companies means more paperwork and fees. It's like having to clean the whole apartment by yourself—twice the work!
- You may need separate insurance for both companies, which is not ideal for your wallet and overhead.
- Don't think a holding company will magically shield you from debt collectors. They might still come after your holding company if things go south, meaning you could still lose your equipment.
The Verdict? Talk With Us!
A holding company can be a good idea for established businesses with valuable stuff, but it's optional for some startups. Think long-term: if you see yourself growing and acquiring more things, then it might be a smart move.
Remember, consulting a professional (accountant, lawyer) is key before making any big decisions. Regarding leasing, however, we’re the people you want at the table. Your next leasing strategy starts with us closely examining where you want to go and pairing it with the lease that grows your business—not your overhead. Contact us today to get started!
