Guide
Holding company vs operating company
The short answer
An operating company trades: it invoices customers, employs people, and carries commercial risk. A holding company or SPV is passive: it holds shares or assets and does not conduct operational business. ADGM, for example, states that SPVs are passive vehicles requiring a qualifying nexus that cannot conduct operational business or hire staff.
Choosing between them is a governance question, not a tax trick. The two do different jobs, and many groups eventually use both.
Side by side
The practical differences.
Purpose
- Operating company
- Trade, deliver services, employ
- Holding company / SPV
- Hold shares or assets
Invoicing
- Operating company
- Yes
- Holding company / SPV
- No
Staff
- Operating company
- Yes
- Holding company / SPV
- Generally not permitted
Risk
- Operating company
- Carries commercial risk
- Holding company / SPV
- Ring-fences ownership from operations
Administration
- Operating company
- Full operational compliance
- Holding company / SPV
- Governance, registers, and filings
Service provider
- Operating company
- Not usually required
- Holding company / SPV
- Often required for non-exempt vehicles
| Factor | Operating company | Holding company / SPV |
|---|---|---|
| Purpose | Trade, deliver services, employ | Hold shares or assets |
| Invoicing | Yes | No |
| Staff | Yes | Generally not permitted |
| Risk | Carries commercial risk | Ring-fences ownership from operations |
| Administration | Full operational compliance | Governance, registers, and filings |
| Service provider | Not usually required | Often required for non-exempt vehicles |
When a holding vehicle makes sense
- Separating shareholdings from trading risk.
- Preparing for investment or a joint venture.
- Holding a specific asset with clear ring-fencing.
- Family or succession governance planning.
When it does not
- You need to invoice customers or employ staff.
- The objective is anonymity or avoiding disclosure.
- You are forming your first business and have nothing to hold yet.
- The plan depends on an assumed tax outcome.
