Wholly Owned Subsidiary

AAA

DEFINITION of 'Wholly Owned Subsidiary'

A company whose common stock is 100% owned by another company, called the parent company. A company can become a wholly owned subsidiary through acquisition by the parent company or spin off from the parent company. In contrast, a regular subsidiary is 51 to 99% owned by the parent company. One situation in which a parent company might find it helpful to establish a subsidiary company is if it wants to operate in a foreign market. This arrangement is common among high-tech companies who want to retain complete control and ownership of their technology.

INVESTOPEDIA EXPLAINS 'Wholly Owned Subsidiary'

Wholly owned subsidiaries allow the parent company to retain the greatest amount of control, but also leave the parent with all the costs and risks of full ownership. When a lesser number of costs and risks are desirable, or when it is not possible to obtain complete or majority control, the parent company might introduce an affiliate, associate or associate company in which it would own a minority stake.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Loss Disallowance Rule - LDR

    An Internal Revenue Service rule implemented in 1991 to prevent ...
  4. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Merger

    The combining of two or more companies, generally by offering ...
RELATED FAQS
  1. How can an individual investor get involved in FDIs (foreign direct investments) ...

    Learn about what economists call foreign direct investment, and find out why individual investors may find it difficult to ...
  2. 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, ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  3. Trading Strategies

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  4. Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  5. Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  6. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  7. Chart Advisor

    How To Invest In Corporate Spin-offs

    In many cases, a spin-off is a win-win for the companies involved. But how can traders cash in on the corporate gerrymandering?
  8. Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...
  9. Chart Advisor

    This ETF Will Deliver Upside With Downside Protection

    With markets near all-time highs as naysayers warn of a coming correction, how can you stick around for more gains and still limit downside risk? The answer could be industrials.
  10. Investing News

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center