Layering Definition

In a business context, layering usually refers to the process of creating multiple entities to manage risk or ownership. In some cases, these entities are created for legitimate business purposes. For example, a company might create a holding company to own its intellectual property, or set up a new corporation in a foreign country to take advantage of lower tax rates. However, in other cases, layering may be used to hide information or assets from creditors, the government, or the public.

Layering can also refer to the process of adding different elements to an investment portfolio in order to achieve greater diversification and reduce risk. For example, an investor might add bonds to a portfolio that consists mostly of stocks.