Holding company

By acquiring enough voting stock in another company, a holding company, also called a parent company, can exert control over the way the target company is run without actually owning it outright.

The advantages of this approach, provided that the holding company owns at least 80% of the voting shares, are that it receives tax-free dividends if the subsidiary prospers and can write off some of the operating losses if the subsidiary falters.

Yet it is insulated to some extent from the target company's liabilities because of its shareholder status.