A holding company and an operating company serve distinct roles within a business structure. A holding company primarily owns and manages the equity interests of other companies, called subsidiaries, but it does not engage in the production or sale of goods and services. Its main purpose is to control these subsidiaries, often providing strategic direction, financial management, and oversight. Holding companies generate revenue through dividends, interest, and capital gains from their investments in these subsidiaries.

In contrast, an operating company is directly involved in the day-to-day business operations, producing goods, providing services, and generating revenue through its commercial activities. Operating companies manage employees, handle production processes, interact with customers, and bear the operational risks associated with running a business.

The key difference lies in their functions: a holding company is focused on ownership and control, often diversifying its portfolio across multiple industries to mitigate risk, while an operating company is concerned with business operations and generating income through its core activities.

Another distinction is in liability: a holding company limits its risk exposure, as the liabilities of one subsidiary typically do not affect the holding company or other subsidiaries. This structural difference makes holding companies a popular choice for managing and protecting assets across diverse business interests.