A company controlled by another company, called parent company, usually through ownership of, at least, 50 per cent of its shares, or through other organizational or managerial agreement. There are several different types of relationship that a subsidiary company may have with a parent company. In one type of relationship, the parent company is a holding company, meaning that its primary function is to control other firms rather than to engage in business of its own. The holding company owns the majority of  in the subsidiary. If the parent company owns all the stock, then the subsidiary is a wholly-owned subsidiary. The formation of a subsidiary company may be of benefit to a multinational corporation that wants to adapt its business to work within the legal parameters of a specific country. Forming a subsidiary is often less expensive than merging with another company. In addition, a subsidiary retains its branding, which may have irreplaceable market value, and maintaining a subsidiary rather than merging can limit liability in a risky venture due to the separation of corporate identities. See holding company; parent company; sister company.

Related entries