ShmoopTube

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Finance a la shmoop what is a holding company? okay okay enough of that [Man and woman crying in each others arms]

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different kind of holding company your great grandpappy Milton died and left

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you 20 million bucks you've always wanted to own your own bar or like 20 of

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them so you hop in your f150 which you lovingly named Roscoe and you buy 20

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bars for a million dollars each but they produce so much cash that well a year

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later you have five million bucks to spend on more bars but you're kind of [Car drives between bars across the US]

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done with driving all over creation in old Roscoe there so you buy a mega

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distillery and then you buy a DJ music management company and then you buy an

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insurance company specializing in insuring bars you know it's a lot of

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pool tables and fights that happens in that way in movies anyway and then you [Man punches a man at a pool table]

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buy a pool cue stick supply company because well in those fights they

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always seem to be the first thing to break each of these businesses exist

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separately and makes money on its own so you have a whole pile of assets here

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kind of different divisions they're pretty well separated in each of which

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kind of lives on its own but it's happy to have a dotted line relationship with

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the other companies that are sort of in the family and you note that in any [Person highlights day in the calendar]

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given year one company might be very profitable while another might be losing

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money so you come up with a clever idea of having a holding company put all of

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the assets into one legal entity framed as an operating company so that taxable

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gains from one division can be efficiently offset by losses from

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another and the party rages on so this is a pretty common structure in [People partying at a club]

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industries where one hand kind of sort of washes the other

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check out all the little companies that comprise Time Warner, HBO, Turner, TBS and

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kind of part of Hulu and on and on and on and what about alphabet you have a

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holding company for Google yeah well there's you know YouTube and nest labs

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and calico and WayMo a bunch of other stuff so yeah a holding company holds

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other companies and a lot of times it's done just for tax optimization and for

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friendly dealings among the various partners got it when things aren't going well well [Man and woman crying]

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and it's a different kind of holding company and there's a whole lot of

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crying....

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