• Let's say you have a corp who owns the trademarks and other "trade dress" around some brand. To keep things generic, let's call this brand X, and say you have 100% ownership of Brand X Holdings, Inc (BXH). You're also the 60% owner of another company which is unbranded.
• Why not declare that that company will herein be known as Brand X? By using Brand X, the company will have to pay a licensing fee to BXH for use of the trade dress.
• If the company now using the Brand X logo makes $1,000 a month, you'd see $600 of that as a 60% owner. But if it pays $1,000 in licensing fees to BXH every month, you'd control $1,000 of that revenue. By changing the unbranded company's letterhead and some images on its website, you just made $400/month every month.
• And that money is safer: your holding company likely has zero employees and zero expenses, while the now-branded company actually does things out in the world with costs attached. If the worst comes to pass and the active company goes bankrupt, you'd have a 60% share of zero in the active company. But once the money moves to BXH, a separate entity, it is almost certainly sheltered from any claims by creditors. In later posts I'll talk about other potential benefits.
• As outsiders looking at the sum of the newly-branded company and BXH taken as a unified whole, nothing is happening, as if you moved a $20 bill from your left hand to your right. Clearly, the owner of BXH does care and sees a real benefit, at the expense of the other 40% of the unbranded company. Rebrandings happen all the time, and are usually billed as a new coat of paint and a new beginning; who knows, maybe that's entirely true and the unbranded company is better for it. But do take note of this flow of licensing fees, because this technique is a basic building block of many of the things I'll be writing about in the future.