Understanding a Subsidiary

Introduction

Definition of subsidiary.

A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and partly or wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a government or state-owned enterprise. The controlling entity is called its parent company, parent, or holding company.

An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity, locomotives and rolling stock. In contrast, a non-operating subsidiary would exist on paper only (i.e. stocks, bonds, articles of incorporation) and would use the identity and rolling stock of the parent company.

Subsidiaries are a common feature of business life, and all multinational corporations organize their operations in this way.

A parent company does not have to be the larger or "more powerful" entity; it is possible for the parent company to be smaller than a subsidiary, or the parent may be larger than some or all of its subsidiaries (if it has more than one).The parent and the subsidiary do not necessarily have to operate in the same locations, or operate the same businesses, but it is also possible that they could conceivably be competitors in the marketplace. Also, because a parent company and a subsidiary are separate entities, it is entirely possible for one of them to be involved in legal proceedings, bankruptcy, tax delinquency, indictment and/or under investigation, while the other is not.

As a subsidiary of a large global business, how can you make sure that you are firmly on the radar screen? Revealed are some of the strategies that subsidiary executives can use to increase their influence on, and investment from parent companies…

For a subsidiary to prosper within a global...