i am aware there purpose is simply to hold assets .
but why certain people prefer to setup companies while prefer to setup trusts ?
what are the regulatory / governance / operational / taxation differences for these entities ?
As you are aware that these holding companies whether its Pvt ltd, limited , lLP or trust are created to consolidate the ownership. The Different types of entities are used primarily due to below factors :-
- The Ownership Structure :- If its closely held groups , they would prepare LLP know earlier people used keep a private limited companies . In case of Public companies ... where ownership is distributed widely ... certain times you need to have holding company too required to be Limited company only.
- Management perspective:- If a Companies are run by professionals who are neither owners are prone to more responsibility where they are open to more verification ... in those cases ideally company will be Limited companies who has more compliance than private companies/ LLp or trusts.
- Beneficiary Interest:- from beneficiary interest which are created in different forms due to long term thoughts of business families in administration of family corpus into varios divisions. Those things are more easily defined in trust kind of organization which are created for limited purpose.
- Taxation ... :- In case of Companies which is at highest tax rate 30% which is going to lesser in coming years as per GOI ( Govt of India ) plans to reduce the corporate tax to 25%. The Distribution of earning post tax also in case of companies require further tax on Dividend at around 20%. Incase of LLP and Trust this doesn't arise , once the tax is paid at highest slab .. the owners can use or withdraw as per thoughts.
- Uncertainities :- Many times due to uncertainties in government policies closely held companies goes for simpler form of organization like LLP or Trust rather than companies .. Ex:- Tax on Dividend receiver more than 10 Lacs
- There can be combination or one of the above or further new reason as these things are part of core team thought process.
thank you for detailed answer .
can you elaborate point no.4 taxation in more detail .
In case of Companies … Share Holder cant withdraw profits as same is termed as Dividend and there is a tax on Divident Distribution again … Same is not the case with LLP