What is a Wholly-Owned Subsidiary?
A subsidiary is a separate company that is owned by a larger (parent) company. If the parent firm owns between 51% to 99% of the company’s stock, the company is considered a “subsidiary”.
What is a Wholly-Owned Subsidiary?
A wholly owned subsidiary is a business entity whose equity (ownership interest) is entirely held or owned by the parent company. If the parent firm owns 100% of the company’s stock, the company is considered a “subsidiary”.
- Example: Company A (a corporation that issues common stock as its form of equity) is a wholly owned subsidiary of Company B (the parent company) if Company B is the sole owner its common stock.
Management of a Subsidiary
A the parent company may or may not have anything to do with the activities and managerial tasks of the subsidiary. For instance, it is possible that a wholly owned subsidiary and a parent company operate independently except for the routine reporting of performance.
Advantages and Disadvantages of a Wholly Owned Subsidiary
- Ability to exercise control or allow company autonomy
- Strategic partnership between parent and subsidiary operations (Vertical/Horizontal Integration)
- Increased resources for the subsidiary (financial, knowledge, support staff, marketing, etc.)
- Regulatory risks (Securities Law, Antitrust Law)
- Increased complexity of management
- Potential undue influence by parent over subsidiary
- Cultural discrepancies between companies
Related Topics
- Business Entities (Intro)
- Why is studying business entities important?
- Considerations When Forming a Business Entity
- Holistic (Detailed) Overview of Setting Up a Business Entity
- What are Business Entities?
- What is a Closely-held vs Publicly-held Business?
- What are the main types of business entity?
- What are the primary characteristics of business entities?
- What is Creation of a business entity?
- Where to Form a Business
- Incorporating in Delaware
- Forming an LLC in Nevada or Wyoming
- Creating a Company Offshore
- Promoter
- Promoter Liability
- De Jure Corporation
- Ultra Vires
- Brassplate Company
- What is Maintenance of a business entity?
- What is Continuity of a business entity?
- Business Continuity Planning
- Buy Sell Agreements
- Shotgun Clause
- Winding Up
- Dissolving a Foreign Qualification
- What is the Ownership structure of a business entity?
- Joint Stock Company
- Parent Company
- Subsidiary Company
- Wholly-Owned Subsidiary
- Operating Subsidiary
- Holding Company
- State-Owned Enterprise
- Mutual Company
- Conglomerate
- What is Control of a business entity?
- What is Personal liability of owners of a business entity?
- Entity Theory
- Piercing the Corporate Veil
- What is Compensation of business owners?
- What is Taxation of a business entity?
- What is Sales & Use tax?
- What are payroll and self-employment taxes?
- What are the major characteristics of a Sole proprietorship?
- Uniform Partnership Act
- Uniform Limited Partnership Act
- Partnership Agreement
- At-Will Partnerships
- Responsibilities of Partners to the Partnership
- Silent Partner
- Funding the Partnership
- How are Partners Compensated
- Splitting Equity in an Industrial Partnership
- Terminating the Partnership
- Types of Partnerships
- What are the main characteristics of a General partnership?
- Tort Liability of General Partner
- What are the main characteristics of a Joint venture?
- What are the main characteristics of a Limited partnership?
- Family Limited Partnership
- Master Limited Partnership
- What are the main characteristics of a Limited liability partnership?
- What are the main characteristics of a Limited liability company?
- Forming an LLC
- Articles of Organization
- Operating Agreement or LLC Agreement
- Why You Need an LLC Agreement
- LLC Compensation of Members
- LLC Taxation
- Converting to an LLC
- What are the main characteristics of a Corporation
- Articles of Incorporation
- What to include in the Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter’s Rights
- What are the requirements to be an S Corporation?
- Non-Profit Organization
- NonProfit Business Entities
- Private Foundation
- A Detailed Explanation of the Sole Proprietorship
- Taxation of Sole Proprietorship
- A Detailed Explanation of the General Partnership
- 50/50 Partnerships: Never a Good Idea
- Publicly-Traded Partnerships
- A Detailed Explanation of the Limited Liability Company
- A Detailed Explanation of the Corporation
- Keepwell Agreement (Letter of Comfort)
- Personal Service Corporation Definition
- A Detailed Explanation of the Non-Profit Entity
- Public Limited Company (UK)
