DEFINITION of 'Subsidiary'

A company whose voting stock is more than 50% controlled by another company, usually referred to as the parent company or holding company. A subsidiary is a company that is partly or completely owned by another company that holds a controlling interest in the subsidiary company. If a parent company owns a foreign subsidiary, the company under which the subsidiary is incorporated must follow the laws of the country where the subsidiary operates, and the parent company still carries the foreign subsidiary's financials on its books (consolidated financial statements). For the purposes of liability, taxation and regulation, subsidiaries are distinct legal entities.


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BREAKING DOWN 'Subsidiary'

The purchase of a controlling interest differs from a merger and the parent corporation can acquire the controlling interest with a smaller investment. Additionally, stockholder approval is not required in the formation of a subsidiary as it would be in the event of a merger. Famous investor Warren Buffett's Berkshire Hathaway, Inc. has a long and diverse list of subsidiaries, including Clayton Homes, the Pampered Chef, GEICO Auto Insurance and Helzberg Diamonds.

  1. Conglomerate

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  3. Merger

    The combining of two or more companies, generally by offering ...
  4. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
  5. Parent Company

    A company that controls other companies by owning an influential ...
  6. Spinoff

    The creation of an independent company through the sale or distribution ...
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  2. What happens to the company stock if a subsidiary gets spun off?

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  3. Are there any practical differences between a wholly owned subsidiary and a regular ...

    There are differences between a wholly owned subsidiary, or a company 100 percent owned by another company, and a regular ... Read Full Answer >>
  4. Why would a company have a subsidiary in a different sector from its main source ...

    A company would have a subsidiary in a different sector from its main source of business if it is looking to increase its ... Read Full Answer >>
  5. What is the difference between a subsidiary and a wholly owned subsidiary?

    The difference between a subsidiary and a wholly owned subsidiary is the amount of control held by the parent company. A ... Read Full Answer >>
  6. How do spinoffs impact investors in the both the parent and subsidiary companies?

    A spinoff is when a company takes a portion of its operations and breaks it off into a separate entity. In a spinoff, shares ... Read Full Answer >>
  7. What is the difference between a subsidiary and a sister company?

    The difference between a subsidiary and a sister company lies in their relationship to the parent company and to each other. A ... Read Full Answer >>
  8. Is there a limit to the number of SPVs / SPEs a company can create?

    There are no fixed, definable legal limits on the number of affiliate companies that a corporation can create. Special purpose ... Read Full Answer >>
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  11. How do businesses decide whether to do FDI via green field investments or acquisitions?

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