Key Takeaways
- Holding companies are a useful way to save on taxes and operational costs.
- However, hidden company expenses can offset your potential savings, especially if you operate subsidiaries or work in numerous jurisdictions.
- Strategizing around these issues is key to minimizing costs.
- Plus, alternative payment platforms can help you save money on transactions.
Operating a holding company is a great way to save money across the board — but this strategy can come with hidden company expenses.
To make the most of your holding company, you’ll need to look closely at every aspect of operations, from compliance and tax filings to administration, banking, and payroll.
Here are several holding company costs that you should look out for.
Regulatory and Reporting Fees
Setting up a holding company means that you’ll need to abide by local rules and regulations, including by filing mandatory reports with the relevant authorities.
Filing usually isn’t free. Government agencies can charge filing submission fees that may collectively amount to hundreds or thousands of dollars per year. Below, we’ll identify key filing types and ways in which you can reduce the associated costs.
Incorporation Documents
Incorporation documents, such as articles of incorporation and registration certificates, allow your holding company to operate legally. You can expect to file incorporation documents once per jurisdiction, or once per subsidiary per jurisdiction.
You can save money by tightening operations: with fewer subsidiaries and operating regions, you’ll be able to submit and pay for filings fewer times overall.
Annual Returns
Your holding company also needs to file annual returns to help the local government maintain up-to-date records on its corporate registry.
Filing these annual returns is unavoidable, but you can save on additional costs by avoiding changes to your company that would require amendment filings.
That includes refraining from excessive changes to company membership, addresses, and share structures, all of which may require separate amendment forms and fees.
Late Filing Fees and Penalties
There are strict deadlines for submitting certain documents, such as returns or tax reports. Often these need to be filed on a monthly, quarterly, or annual basis.
Filing on time is critical to avoiding late fees. If you do face a late fee, pay as soon as possible to avoid charges beyond the initial fees. Late payments may lead to compounding fees or operating restrictions that cost time and money.
Dissolution Documents
If you close a company, you’ll need to submit a dissolution filing. This generally involves a one-time fee to remove it from the government’s corporate registry.
These filings relieve your company from other filing obligations and protect its members from ongoing liabilities, such as future tax obligations, legal claims, and debts.
Even though filing a dissolution statement usually comes with a fee, it’s a vital way to avoid future holding company costs tied to an inactive entity.
Banking, Tax, and Administration Costs
Compliance is just one area with hidden company expenses. Let’s look at a few high-cost areas within your holding company’s general activities.
Business Bank Account Fees
Holding companies need to make payments, and maintaining a business bank account to handle those payments generally costs money.
In addition to bank transaction fees and foreign currency conversion rates, you can expect to pay monthly fees and other service charges. This is especially true if you rely on premium services and dedicated account managers at traditional banks.
It’s impossible to avoid these fees entirely, but you can save money by choosing alternative payment platforms like Payset, which offer competitive and affordable rates.
Accounting and Financial Management
Holding company accounting fees are another expense, and this also extends to financial management, payroll, internal auditing, and bookkeeping costs.
Your company should hire or contract experts in each area. The cost of doing so will vary with the size of your company, the amount of financial activity it engages in, and the scope of regulations that you need to operate in compliance with.
These roles are all critical: they ensure that you can operate and meet compliance obligations, so it’s a good idea to allocate funds liberally.
However, there are ways to save money indirectly. Affordable and low-fee payment services can ensure that you can pay your staff with minimal costs.
Tax Compliance
In order to pay taxes, you’ll likely need to hire tax advisors and accountants who understand the specific tax rules in every jurisdiction that you operate in.
Beyond the cost of employing tax professionals, you might need to maintain internal tax compliance systems, tax software, and recordkeeping practices. Such systems can be costly in their own right due to high subscription fees and data storage costs.
Again, these are areas that deserve full financing — but you can save on payroll and transactional costs by choosing a payment option with low fees.
Holding-Related Expenses
You should expect holding company costs related to the transaction of assets.
This includes brokerage and transaction fees whenever your company buys or sells assets, acquires or disposes of subsidiaries, and otherwise transfers property.
These procedures are usually performed through transfer agents and financial intermediaries that charge fees on every transaction. You might also need to pay for ongoing administration and management costs after the transaction.
You can save money in this area by consolidating and scheduling transactions and by negotiating with brokers for volume discounts on bulk transactions.
Cryptocurrency Compliance
If your holding company works with cryptocurrency or digital assets, you should be prepared for additional costs related to compliance and asset protection.
General Compliance Costs
The EU’s Markets in Crypto-Assets Regulation (MiCA) regime and the UK’s Financial Conduct Authority (FCA) set strict rules for companies that use cryptocurrency.
These regimes permit compliant crypto activity, but enforcement is strict. Governments are able to monitor the crypto sector closely due to its small size and impose high penalties. Your company may be at risk of greater costs by working with crypto.
And if there are general crypto-related filing obligations, you’ll need to pay standard filing fees and allocate resources toward preparing those filings.
Transaction Monitoring (KYC/AML)
Know Your Customer (KYC) and Anti-Money Laundering (AML) rules involve detecting and preventing suspicious transactions.
Though KYC/AML rules apply to all transactions, they’re especially strict around crypto, and you may need to invest in analytics tools to monitor for unusual activity.
Or, depending on the scope of your crypto operations, you may be able to choose a payment platform that handles transactions in a compliant way at minimal cost, reducing or eliminating the need for an in-house KYC/AML solution.
Custody Obligations
If you hold crypto, you may need to store it with a qualified custodian that meets certain conditions and follows security practices specific to digital assets.
Custodians charge service fees for as long as they hold your crypto. To save on costs, you should compare different providers’ rates. Note that you may save on related costs if your preferred custodian bundles crypto exchange and crypto payment services.
Compliance Staff and Training
Holding companies have minimal staff for day-to-day operations, but they often have experts to ensure compliance with regulations and carry out other duties.
As your holding company grows, you might work with a vast team of compliance officers, financial officers, legal officers, tax experts, and internal auditors.
In addition to paying staff salaries, you might need to pay for training initiatives to ensure that your team keeps up with the latest requirements and best practices. This can amount to substantial payroll and professional development costs.
Although these are necessary costs that shouldn’t be avoided, it’s possible to save money on transaction and account fees with the right payment provider.
How Payset Keeps Pricing Transparent
At Payset, we provide payment services with transparent pricing, with competitive rate structures targeted at holding companies and large teams. You’ll enjoy:
- Free sign-up on business and personal accounts
- Free transactions between Payset customers
- Real-time rates and fee previews on foreign currency trades
- Recurring monthly access fees of £29 for business accounts
- Affordable transaction fees on various payment methods, as detailed here
Our reach is global. With Payset, you’ll be able to transact in 180 countries and hold 34 currencies in your account — ideal for holding companies working internationally.
Plus, you’ll benefit from other features, like bulk payments and team access, visibility into your account balances, and fast-tracked onboarding and approval so you can start transacting even if you have a complex corporate structure.
