5 Reasons Why It’s Smart To Have An Intellectual Property Holding Company

The term “IP Holding Company” (herein referred to as “IPHCo”) in this post refers to a legal entity separate from a business’ main trading entity and existing for the specific purpose of holding intellectual property assets.

1. An IPHCo serves as a special purpose vehicle to hold the IP of a business separate from the main trading entities. The rationale for this is to protect those IP assets from issues that may affect the trading entities such as litigation, financial difficulties or liquidation since creditors of the business will not be able to attach the IP.
2. An IPHCo can be used as part of a company’s overall business structure. The IPHCo can be registered as a separate legal entity or as a subsidiary or parent company of a business or group of companies.
3. A business or group of companies may secure certain tax advantages or deductions by the registration of an IPHCo and payment of royalties to the IPHCo for the use of the IP by the business or group of companies. (In this regard it is important to note that tax advice should be obtained since there will generally be a withholding tax on royalties paid to a foreign company and the implications of this and other taxes should be understood carefully).
4. The centralisation of a company’s IP in an IPHCo allows the IP to be centrally registered and managed which is useful especially if the company has a large IP portfolio. The IPHCo will usually attend to all matters relating to the registration, enforcement, assignment, licencing, marketing and associated matters related to the use and exploitation of the IP.
5. The IPHCo will be able to reflect the IP as assets in its balance sheet and consequently that of the group company which can in turn be leveraged as security to, for example, secure finance.