Affiliate

AAA

DEFINITION of 'Affiliate'

A type of inter-company relationship in which one of the companies owns less than a majority of the other company's stock, or a type of inter-company relationship in which at least two different companies are subsidiaries of a larger company.

BREAKING DOWN 'Affiliate'

For example, let's say BIG Corp. owns 40% of MID Corp.'s common stock and 75% of TINY Corp. In this case, MID Corp. and BIG Corp. have an affiliate relationship, and TINY Corp. is BIG Corp.'s subsidiary.

However, note that for the purposes of filing consolidated tax returns, IRS regulations state that a parent company must possess at least 80% of a company's voting stock in order to be considered affiliated.

RELATED TERMS
  1. Conglomerate

    A company that owns controlling stake in a number of smaller ...
  2. Affiliate Network

    Third parties that provide a link between a publisher and a company ...
  3. Holdco

    An abbreviation for holding company. A holding company is a firm ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding ...
  6. Voting Shares

    Shares that give the stockholder the right to vote on matters ...
Related Articles
  1. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  4. Investing

    Is Alphabet the Next Berkshire Hathaway?

    Google has made headlines for self-driving cars and biotech products, but the most profitable part of the business remains the advertising connected with its search engine.
  5. Stock Analysis

    Warren Buffett's Latest Bet: The Riskiest Yet?

    Warren Buffett just made the biggest — and possibly riskiest — acquisition of his career.
  6. Investing News

    How Google's Transformation to Alphabet Will Impact Shareholders

    Google will retain search, ads, maps, apps, YouTube and Android, according to the company’s SEC filing, while Calico, Nest (interconnected thermostats and smoke detectors), Fiber (broadband and ...
  7. Investing News

    Why Google Became Alphabet

    Why did Google create Alphabet? Will it change the company's DNA or is it a mere rechristening?
  8. Investing

    5 Conglomerates with Exposure to the Caribbean

    These five well-diversified conglomerates play a major role in the economies of the Caribbean.
  9. Stock Analysis

    How Honeywell (HON) Makes its Money

    Honeywell is a true conglomerate in a world of ever-greater specialization. Here's how it generates revenue.
  10. Fundamental Analysis

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
RELATED FAQS
  1. How did the Dodd-Frank Act change whistleblower protection and processes?

    In 2010, the Dodd-Frank Act strengthened and expanded the existing whistleblower program promulgated by the Sarbanes-Oxley ... Read Full Answer >>
  2. Are any arm's-length transactions disadvantageous to both parties?

    Generally speaking, the arm's-length principle is supposed to protect both parties taking part in a transaction from exploitation. ... Read Full Answer >>
  3. What are the major costs to a firm when pursuing vertical integration?

    In the initial stages of a vertical integration, there are inevitable legal and administrative costs as the two companies ... Read Full Answer >>
  4. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  5. What is the difference between a green field and a brown field investment?

    Green-field and brown-field investments are two different types of foreign direct investment, or FDI. Green-field investments ... Read Full Answer >>
  6. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!