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Holding Companies
Part 2 of “How to Dodge Taxes”
I got to know a successful businessman. He had annual sales of $5,000,000 a year. He had two front companies called XYZ Sales Ltd. and XYZ Service Ltd. to handle the clients. “Sales” sold the machines; “Service” maintained them after the sale. He had three holding companies that owned various shares in the two front companies. He owned the shares in the holding companies.
He was shuffling money around the five companies to reduce his taxes. He would adjust “salaries & dividends” between the companies, which I talked about in Part 1.
Having this corporate structure is not as easy as it sounds. First, each company had to be set up as a formal corporation, let’s say $5000 for the group. Then, each year, each company had to file annual tax returns to the government. I estimate the filing fees for the holding companies were probably $1000 a year; the front companies were $3,000 each. And the corporate minute books for all five companies had to kept up to date with all the “big decisions,” like management salaries and dividends. So probably two or three…
