What is a subsidiary company?

A subsidiary is a company that is more than 50% owned by a parent company or holding company. Subsidiaries are separate and distinct legal entities from their parent companies. Companies buy or establish a subsidiary to obtain specific synergies or assets, secure tax advantages, and contain or limit losses.

What is a wholly owned subsidiary?

The parent holds a controlling interest in the subsidiary company, meaning it owns or controls more than half of its stock. In cases where a subsidiary is 100% owned by another company, the subsidiary is referred to as a wholly owned subsidiary . A subsidiary is a company that is more than 50% owned by a parent company or holding company.

Why does a company buy a subsidiary?

Usually, companies take ownership of subsidiaries to extend the range of their products and services beyond what would be expected from the parent company’s brand. The purchase of an interest in a subsidiary differs from a merger because the parent company can acquire a controlling interest with a smaller investment.