How to Start an Investment Holding Company

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Investment holding companies, as the name implies, exist solely to hold investments. Investment holding companies do not offer any products or services to the public, including financial planning services. Holding companies are essentially a vehicle for individuals or partners to make personal investments under the umbrella of a legal company, adding a layer of liability protection for highly-speculative investments or making transfer of multiple financial assets easier in estate planning. You can start your own investment holding company by forming a strategy and filing the proper paperwork.

  • Form an initial investment strategy. Determine exactly which types of investments you wish to hold. Investment holding companies can invest in stocks, bonds and other securities, as well as real estate, annuities, loans and other alternative investments. Create a plan for a balanced portfolio, hedging your favored risks with investments with inverse value correlations. The decisions you make in this step will affect decisions you make in subsequent steps.

  • Select a form of business organization. The types of investments that you choose to hold will influence the ideal form of organization for you. As mentioned, if you plan to hold highly-speculative, highly-leveraged investments, such as real estate and foreign currencies bought on margin, seriously consider choosing a form of organization that offers liability protection, such as a limited liability company or S-corporation.

  • Register your business in your state. Submit the required registration documents for your chosen form of organization. Contact the secretary of state's office in your state for guidance on the exact documents and procedures required for your business type.

  • Ask a representative from the secretary of state about any licensing requirements in your state for investment holding companies, or go to the Small Business Administration's Business Licenses and Permits page on their website to find a list of state licensing authorities (see Resources).

  • Obtain start-up financing. The amount of financing you need will depend on the decisions you made in step one, as well as the ambitiousness of your growth plans. If you plan to hold mostly real estate, for example, you might need to obtain several large mortgages at once from a single lender. If you plan to favor stocks, you might decide to start with a small bankroll and work your way up, or start with a larger bankroll to employ your proven strategy on a large scale right away.

  • Build your initial portfolio. With your start-up capital in hand, purchase your initial assets according to the asset allocation plan you developed. At this point you are officially up and running. Continue to monitor your investments, using capital gains and other investment income to finance progressively more and larger holdings.

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