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If you intend to set up a company or invest in one, you need to consider how you will own its shares. Owning shares in a company can be in an individual capacity, through a company or a trust. This article sets out the advantages and disadvantages of owning company shares in one company (the Operating Company) through another company (the Holding Company).

Dual Company Structure

A dual company structure comprised of a holding company and an operating company. The holding company holds 100% of the shares of the operating company and any major assets. The operating company is the entity that the business operates from, holding all contractual agreements with employees, suppliers and clients. It is the operating company which will incur all liabilities.

Additionally, a dual company structure is beneficial as it generally provides an extra level of protection to the company’s assets. This company structure protects the company’s assets from any liability the operating company incurs through the course of business. 

For example, suppose a client or customer sues your company. In that case, they will have to take action against the company they have a contractual relationship with – this would be the operating company. 

In a dual company structure, the operating company will not hold the company’s major assets. Therefore, there is an extra level of protection. Having your shares of the operating company in the holding company adds extra protection to your investment in the company.   


There are several advantages to owning shares through a Holding Company. The below points outline the main advantages.

Asset Protection

You can ensure the Holding Company owns all of the business’ valuable assets and intellectual property and that the Holding Company is ring-fenced from potential liability. This will protect these assets, including the operating company shares, from being subject to any liabilities incurred in the course of operating the business. 

Limited Liability

In the unlikely event that the corporate veil of the operating or subsidiary company was to be pierced, any potential liability you might face as a shareholder of the holding company would be limited to the amount unpaid on your shares.

A dual company structure also minimises risk, as the holding company holds valuable assets. This structure protects these assets from any debts or liabilities incurred during the operation of the business through operating or subsidiary company.


It is less costly to establish share ownership through a holding company than through a trust. It is also less complex to establish share ownership through a holding company structure. This is especially when the company’s shareholders are not family members or you plan to take on external investment from other parties. 

Additionally, in a company structure, shareholders are entitled to the dividends proportionate to their individual shareholdings. Contrastingly, in a discretionary trust, the trustee can distribute dividends from trust property at their own discretion. Hence, it is much harder to control in a business situation.


Shareholders in Holding Companies have more flexibility to decide individually on their drawdown or reinvestment strategy.

Tax Minimisation

You can set up a Dual Company structure to minimise tax paid by both the holding and operating companies. Dividends paid from the operating or subsidiary company to the holding company are tax-free. The holding company can use the dividends to make investments on behalf of the operating company. Shareholders in holding companies can determine whether they want to direct the flow of dividends from the operating or subsidiary company to themselves or leave some or all of it in the holding company for reinvestment without incurring an individual tax liability. In this structure, the operating company’s profits can be reinvested to benefit the business in the most tax-effective manner.


There are no potential succession problems relating to the shareholder’s death as companies cannot die. Establishing a dual company structure allows for business continuity in the event that a shareholder dies or decides to sell their shares. Likewise, the operating company can adapt to this change with minimal interruption to operations.


Although owning company shares through a Holding Company presents significant advantages, it is vital to know and understand the following drawbacks:

  • Expense: You would have to pay to incorporate a second company. There are also annual company renewal fees which you will need to pay for both the Holding Company and the Operating Company.
  • Reporting requirements: Having two companies would mean having to keep records for two companies.
  • Business Activity Statements: As well as the complexity involved in this process, it would also result in additional costs for the business.
  • Privacy: Your financial affairs, including your share investment, will be made public.
  • Tax: Profits you distribute to shareholders are taxable at the shareholder’s top marginal rate.
  • Capital gains tax discount: The shareholders are not entitled to a capital gains tax discount if they sell their shares.

Setting Up a Dual Company Structure

Setting up a dual company structure to hold company shares can have many benefits. This structure can benefit your business by providing protection to important company assets and allowing growth through reinvestment of profits in the most tax-effective manner. Setting up a dual company structure involves registering two separate companies with ASIC. The Holding Company will be the shareholder of the Operating Company, which means the Holding Company owns the Operating Company. The owners of the business will be shareholders of the Holding Company.

It is best practice to seek advice from an accountant or tax professional before setting up a dual company structure. You must understand the individual tax implications of this structure for your business.

Key Takeaways

Despite the costs and complexity involved in owning shares through a company, there are several advantages. The main being asset protection and limitation of liability. It is then a viable option when considering how to own shares. However, you can also consider owning your shares through a trust.

If you require assistance setting up your duel company structure, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.


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