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Ely
Ely, Counselor at Law
Category: Legal
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Im not sure as to what a holding company is; I want to form

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I'm not sure as to what a 'holding company' is; I want to form a pharmacy, possibly non-profit, owned by a holding company. I also want to start a second, non-pharmacy, non-profit, owned by a holding company. Is there a problem with as holding company owning a non-profit entity, or a non-profit pharmacy. Would it be better if the pharmacy was 'for profilt'?
Submitted: 9 months ago.
Category: Legal
Expert:  Ely replied 9 months ago.
Hello and thank you for requesting me. Also, please allow me to thank you for your earlier bonus.

I'm not sure as to what a 'holding company' is

A holding company is a company or firm that owns other companies' outstanding stock. For example, there is corporation ABC, Inc. which has 400 shares. A company called 123, Inc. can own 200 of those. If so, 123, Inc. is a holding company.

A holding company reduces liability risk for the owner of the shares and can allow the ownership and control of a number of different companies.

I want to form a pharmacy, possibly non-profit, owned by a holding company.

If you wish to do this, you can. Essentially, you'd have a company who owns the shares. But honestly, for a small/medium-sized non-profit, this is often not needed. First, non-profits generally DO NOT HAVE shares. Second, even if you have shares somehow, most holding companies are for multi-million dollar shares that go across the spectrum of companies and stocks. For one company, this seems a little bit like overkill.

One is better off simply having a simple corporation or LLC, not stocks (and no holding companies).

I also want to start a second, non-pharmacy, non-profit, owned by a holding company. Is there a problem with as holding company owning a non-profit entity, or a non-profit pharmacy.

No. However, a company that owes another company is called a "parent corporation" (a more general term). A company that holds another company's shares is called a "holding company" (also a parent corporation, but more specifically to stocks).

Would it be better if the pharmacy was 'for profilt'?

If you intend to make profit on the company, then yes. A non-profit has to be approved by the IRS, and falls into one of these categories:

501(c)(1) — Corporations Organized Under Act of Congress (including Federal Credit Unions)
501(c)(2) — Title Holding Corporation for Exempt Organization
501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations
501(c)(4) — Civic Leagues, Social Welfare Organizations, and Local Associations of Employees
501(c)(5) — Labor, Agricultural and Horticultural Organizations
501(c)(6) — Business Leagues, Chambers of Commerce, Real Estate Boards, etc.
501(c)(7) — Social and Recreational Clubs
501(c)(8) — Fraternal Beneficiary Societies and Associations
501(c)(9) — Voluntary Employee Beneficiary Associations
501(c)(10) — Domestic Fraternal Societies and Associations
501(c)(11) — Teachers' Retirement Fund Associations
501(c)(12) — Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies, Mutual or Cooperative Telephone Companies, etc.
501(c)(13) — Cemetery Companies
501(c)(14) — State-Chartered Credit Unions, Mutual Reserve Funds
501(c)(15) — Mutual Insurance Companies or Associations
501(c)(16) — Cooperative Organizations to Finance Crop Operations
501(c)(17) — Supplemental Unemployment Benefit Trusts
501(c)(18) — Employee Funded Pension Trust (created before June 25, 1959)
501(c)(19) — Post or Organization of Past or Present Members of the Armed Forces
501(c)(20) — Group Legal Services Plan Organizations
501(c)(21) — Black lung Benefit Trusts
501(c)(22) — Withdrawal Liability Payment Fund
501(c)(23) — Veterans Organization (created before 1880)
501(c)(24) — Section 4049 ERISA Trusts
501(c)(25) — Title Holding Corporations or Trusts with Multiple Parents
501(c)(26) — State-Sponsored Organization Providing Health Coverage for High-Risk Individuals
501(c)(27) — State-Sponsored Workers' Compensation Reinsurance Organization
501(c)(28) — National Railroad Retirement Investment Trust
501(c)(29) — Qualified Nonprofit Health Insurance Issuers (Created in section 1322(h)(1) of the Affordable Care Act)

As such, unless it does, and unless the company WILL OPERATE with a non-profit goal, it is best to do this as a for-profit company.

I hope this helps and clarifies. Good luck.

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Ely, Counselor at Law
Category: Legal
Satisfied Customers: 86711
Experience: Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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