Tom and Bob Are Equal Shareholders of a Profitable Operating

question 1

Multiple Choice

Tom and Bob are equal shareholders of a profitable operating company.The company is growing and dividend payouts are increasing.The two men have heard that 'holding corporations' might suit their needs.Which of the following would apply?

• A) Dividends received by the holding companies from the operating company must be invested in the same ventures.
• B) The holding companies would receive the dividends from the operating company, free of tax, to be invested in ventures of Tom and Bob's separate choices.
• C) The establishment of holding corporations would allow Tom and Bob to access the profits of the operating company for personal expenditures without paying a second level of tax.
• D) Dividends would flow from the operating company to Tom and Bob, and then to the holding corporations.

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