A holding company of one

My business interests are not held by me personally but by a German limited company, Zechendorf Family Office GmbH. It owns two operating companies, 100 percent each. That sounds like a group of companies, but at heart it is a decision about order. This note covers what such a structure does, what it costs and what I have learned in the first few years. Figures about my companies don’t belong here; the legal rules do.

What a holding company is

A holding company is a company whose main purpose is to hold shares in other companies. The operating business happens in the subsidiaries: that is where the customers, contracts, staff and the associated risks are. The holding company founds subsidiaries, owns them, receives their profits and decides what happens to them.

What it does for you

Risk stays where it arises. If a subsidiary is liable for a mistake or a contract, the assets of the holding company and of the other subsidiary are separate from it. New ventures get a company of their own instead of weighing on what already exists.

Profits can be reinvested almost untaxed. When a subsidiary pays a dividend to the holding company, that dividend is excluded from corporation tax there; however, 5 percent is treated as a non-deductible business expense (section 8b (1) and (5) of the German Corporation Tax Act, KStG). The same applies to gains from selling a shareholding (section 8b (2) and (3) KStG). For trade tax, the dividend is deducted if the shareholding amounted to at least 15 percent at the start of the year (section 9 no. 2a of the Trade Tax Act, GewStG). In effect only a small fraction is taxed. Taking the same money out privately, by contrast, means paying the full tax on distributions.

This is not a tax-saving scheme in the narrow sense, but a shift in timing. At the latest when money leaves the holding company for private use, it is taxed normally. The advantage is that profits meant to be put back to work in business don’t have to pass through private taxation first.

Order. The holding company is the one place where everything entrepreneurial comes together. For someone who has to take over in an emergency, one company with clear shareholdings is easier to grasp than a bundle of separate positions.

What it costs

The price is not mainly money but obligations. Every GmbH means its own bookkeeping, its own annual financial statements, its own tax returns and its own chain of deadlines. With three companies, that chain runs three times. For a financial year ending on 31 December, it looks like this for a small GmbH:

The articles of association cannot extend the approval deadline. Many articles also repeat the stricter default rules, three months for preparation and eight for approval. In that case the shorter deadline applies internally, even though the law gives a small company more time.

On top of that come obligations that are easy to forget: reporting the beneficial owners to the German transparency register (section 20 of the Money Laundering Act, GwG), compulsory membership of the chamber of commerce, a separate business account, and shareholder resolutions for everything the articles reserve to the shareholders. When one person is both shareholder and managing director, this can look like formality. But it is the proof that decisions were made properly.

What I have learned

Deadlines are calculated, not remembered. In the first years everything depended on my memory and on reminders from the tax adviser. That didn’t always go well: one set of financial statements was only published after the Federal Office of Justice had threatened a fine, and the approval resolutions slipped towards the edge of the deadline year after year. Today every obligation is a rule in a table: a reference point (such as the balance sheet date) plus a deadline in months. From that, the date is recalculated for every year, with weekends moved to the Monday. A task is created well in advance.

Two deadlines per obligation. I steer by my own, shorter deadline and keep an eye on the statutory maximum, which is where the sanction applies. Anyone who only watches the hard deadline has no buffer left when the tax adviser delivers later than expected.

Keep private and business strictly apart. A GmbH has no such thing as private drawings. If the company accidentally pays for something private, the company acquires a claim against the shareholder, which is repaid. If it is left standing, it risks being treated as a hidden profit distribution. The same goes for the managing director’s salary: it has to be reasonable and agreed in advance.

A clear division of labour with the tax adviser. I do the day-to-day bookkeeping and the VAT returns myself. The annual financial statements, corporation tax and trade tax are prepared by the tax adviser. There are three reasons: companies with an adviser get the longer filing deadline, judgement calls such as whether pay is reasonable belong in expert hands, and in a tax audit there is representation. The decisions themselves, however, I work through myself. The adviser prepares, I decide.

Who it is worth it for

A holding company is worth it if profits are mostly meant to stay in business, if there is or will be more than one activity, and if you are prepared to take the annual obligations seriously. It isn’t worth it if the profits are needed privately anyway. Then the structure costs more effort than it brings.

My conclusion after a few years: the tax advantage is real, but it isn’t the most important thing. What matters more is having one place where everything entrepreneurial comes together, with clear boundaries, documented decisions and deadlines that don’t depend on my memory.

Legal position: German law, checked against the statutes in October 2026.