Should I buy through a holding company?

Buying through a holding company is standard on share purchases above the smallest end of the market, and it is frequently raised too late to implement. Once the shares are held personally, moving them into a holdco is a separate transaction with its own tax consequences.

Where the debt sits

If the holding company borrows to buy the shares, the debt sits above the operating business rather than inside it. The operating company can then pay dividends up to service it. Whether the interest is deductible, and against what income, turns on who borrowed and what the borrowing bought — which is the whole reason this is a pre-signing conversation.

Separating value from operating risk

Surplus cash and investments accumulated in the operating company are exposed to its creditors and its litigation. Moving excess value up to a holding company over time puts it outside that exposure, and it also matters for the capital gains exemption, where too much non-operating value sitting in the operating company can jeopardise the tests.

The costs are real, not nominal

A second corporation means a second set of filings, a second corporate record, accounting fees and the discipline to document intercompany transactions properly. On a small purchase that overhead can outweigh the benefit, which is why the answer is "often" rather than "always" and why it is a question for an accountant with your numbers.

Amalgamation is a later option, not a substitute

Some buyers amalgamate the holding company with the acquired company after closing to simplify the structure or align the debt with the cash flow servicing it. That is a deliberate step with its own consequences — including for the liabilities of both entities — and should be planned rather than drifted into.