On top, one Holding Sdn Bhd.
Below, one Trading Subsidiary Sdn Bhd.

Chart very nice.
Box very neat.
Arrow also got feel.

Looks less like SME.
Looks like preparing for listing already.

Until I asked one question:
“What does the holding company actually do?”

Boss said,
“Also got do a bit of trading.”

I asked again,
“What about the subsidiary?”

Boss said,
“Also trading.”

When I heard this, my heart became quiet.
Because this is not really a group structure.

Many SME bosses misunderstand holding company.
They think open one more company, tax will look nicer.
They think dividend flow up, very high level already.
They think management fee charge down, very smart.
They think once they draw a group chart, the business becomes a group.

If two companies are doing the same business,
same customers,
same suppliers,
same staff,

Holding company can be a good tool.

It can be used for succession planning.
It can protect assets.
It can centralise ownership.
It can make future business sale easier.
It can allow dividends to flow up.

But it is not a magic wand.

Open one more company does not mean tax automatically save.
Change one letterhead does not mean income can simply move.
Year-end profit too high does not mean you can simply charge management fee.

SME boss must remember one thing.

Structure can be complicated.
But,
every company must have its own role.
every money movement must have document.
every management fee must have real service.

If not, when IRB audit comes, the most expensive thing may not be the tax.

The most expensive thing is the boss saying:
“I thought can do like this.”

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