Where does money to pay operating expenses come from for holding company like Berkshire

[DTL123]

It is my understanding that shareholders in Berkshire do not pay a management fee so how does Berkshire pay for operating expenses such as salaries, rent, etc. ?

[quantAndHold]

The subsidiary companies kick money upwards.

[Brianmcg321]

Berkshire is a company, not a mutual fund.

[JoMoney]

Berkshire is a company, not a mutual fund.

Depending on what you mean by company, a mutual fund is incorporated as a "Regulated Investment Company." A mutual fund has publicly traded shares , a board of directors, and similar SEC reporting requirements as other publicly traded companies. Being incorporated the way the mutual funds are has lots of additional requirements for the safe-keeping of the funds assets, additional reporting requirements -including some of the expenses being reported as a "Expense Ratio", and ability to pass-through all the tax liabilities to the share holders.
Berkshire Hathaway being incorporated as a subchapter C corporation, is structured very different than a mutual fund, has different risks and tax implications than a mutual fund... but they can both be described as a "company."

[DTL123]

So does that mean that Berkshire receives profits from its subsidiaries and then pays its operating expenses and then what is left over becomes share value of the Berkshire stock?

[Michael Patrick]

Each subsidiary figures its own profits and losses, and typically (but not always) will handle its own cash flow.

If the subsidiary is profitable, they may declare dividends, assuming the subsidiary is a corporation. Berkshire would receive dividends based on the number of shares of the subsidiary it owns.

If the subsidiary is a partnership or S-corp then Berkshire would get a K-1 every year. An S-corp or a partnership may make a non-dividend cash distribution to its partners/members.

[inverter]

So does that mean that Berkshire receives profits from its subsidiaries and then pays its operating expenses and then what is left over becomes share value of the Berkshire stock?

The subsidiaries wouldn't automatically transfer profit to Berkshire. They may declare a dividend, which would go to Berkshire, otherwise the profit just gets reported on the Berkshire financial records.

The subsidiaries may cover some de minimis costs on behalf of Berkshire Hathaway, or more likely Berkshire uses dividends and interest to cover the holding company expenses.

Share value and profit are correlated, but the market value can move independently of profitability.

[lstone19]

You are trying to apply mutual fund concepts to what is not a mutual fund. Regardless of how much BH may look like a mutual fund, it's not.

[alex_686]

So does that mean that Berkshire receives profits from its subsidiaries and then pays its operating expenses and then what is left over becomes share value of the Berkshire stock?

Let’s reframe the question. What is the management fee for Apple?

A mutual fund company is a “zero employee” corporation. As such it pays a specific distinct payment that can be measured to the penny. This stuff is highly regulated.

Companies with actual employees are more of a challenge. What is management? Should a foremen’s salary be counted?

You can divine some much useful information from the annual report but it is not clear cut.

[DTL123]

We hear that Berkshire sits on a lot of cash. Since they are primarily a holding company that buys subsidiary businesses and stock in various other publicly traded companies, I presume that pile of cash comes from dividends from stock that is held in addition to profits from their subsidiaries. Is that correct?

If so, I assume their operating expenses for Berkshire come from that same source. True?

As a Berkshire shareholder, you would simply own a portion of the total Berkshire holdings including the subsidiaries, the stock Berkshire owns in other companies, and the cash being held - right?

[SethJane42]

Profits