A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by a parent company is called a wholly owned subsidiary. Purchasing a company to become a subsidiary is different from a merger and does not always require board approval.Subsidiaries are distinct legal entities and often have their own board of directors, officers, and stock certificates. For tax purposes they have their own federal identification numbers. Subsidiaries formed in a foreign country must comply with the laws of that jurisdiction. For financial accounting purposes, a subsidiary’s accounting and financial results are included into the parent company’s financial records under a method called consolidation. This method is also used for tax reporting purposes. One function of a subsidiary is to isolate risk. When the subsidiary operates as a separate legal entity, any risk inherent in the subsidiary stays within that corporate entity. This protects the parent company’s other assets from being used to cover the subsidiary’s losses. Also, operating a business as a subsidiary (as opposed to an internal division) makes it easier for the parent company to sell that part of its business should it decide to do so in the future. Many corporations operate with multiple subsidiaries. Berkshire Hathaway, Disney, Johnson & Johnson and Nestle are familiar examples.