A subsidiary, in business matters, is an entity that is controlled by a bigger and more powerful entity. The controlled entity is called a company, corporation, or limited liability company, and the controlling entity is called its parent (or the parent company). Generally a company is a form of Business organization. The precise definition varies A corporation is a separate legal entity usually used to conduct business A limited liability company (abbreviated LLC or LLC) in the law of the vast majority of the United States is a legal form of business Company A parent company is a Company that owns enough voting stock in another firm to control management and operations by influencing or electing its Board of directors The reason for this distinction is that a lone company cannot be a subsidiary of any organization; only an entity representing a legal fiction as a separate entity can be a subsidiary. In the Common law tradition legal fictions are suppositions of fact taken to be true by the Courts of Law, but which are not necessarily While individuals have the capacity to act on their own initiative, a business entity can only act through its directors, officers and employees.

The most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent. In financial markets, a share is a Unit of account for various financial instruments including Stocks Mutual funds Limited partnerships These shares give the parent the necessary votes to determine the composition of the board of the subsidiary and so exercise control. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. There are, however, other ways that control can come about and the exact rules both as to what control is needed and how it is achieved can be complex (see below). A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a group, although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership.

Subsidiaries are separate, distinct legal entities for the purposes of taxation and regulation. Commercial law (sometimes known as business law) is the body of Law which governs Business and commercial transactions This article is for the legal term For regulation of genes see Regulation of gene expression. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. A division of a business entity is a portion of that business that operates under a different name

Subsidiaries are a common feature of business life and most if not all major businesses organize their operations in this way. Examples include holding companies such as Berkshire Hathaway[1], Comcar Logistics, Time Warner, or Citigroup as well as more focused companies such as IBM, or Xerox Corporation. A holding company is a company that owns part all or a majority of other companies' outstanding Stock. Berkshire Hathaway ( for supervoting shares and for nonvoting shares is a conglomerate Holding company headquartered in Omaha, Nebraska Time Warner Inc ( is the world's largest media and entertainment conglomerate, headquartered in New York City. International Business Machines Corporation abbreviated IBM and nicknamed "Big Blue", is a multinational Computer Technology Xerox Corporation ( (name ˈziːrɒks is a global document management company which manufactures and sells a range of color and black-and-white printers, multifunction These, and others, organize their businesses into national or functional subsidiaries, sometimes with multiple levels of subsidiaries.

An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity, locomotives and rolling stock. Rolling Stock was a Newspaper of ideas and a chronicle of the 1980s published in Boulder, Colorado

In contrast, a non-operating subsidiary would exist on paper only (i. e. stocks, bonds, articles of incorporation) and would use the identity and rolling stock of the parent company. A parent company is a Company that owns enough voting stock in another firm to control management and operations by influencing or electing its Board of directors

Control

The word "control" used in the definition of "subsidiary" is generally taken to include both practical and theoretical control. Thus, reference to a body which "controls the composition" of another body's board is a reference to control in principle, while reference to being are able to cast more than half of the votes at a general meeting, whether legally enforceable or not, refers to theoretical power. The fact that a company has a holding of less than 51% which, because the holdings of others are widely dispersed, gives effective control is not enough to give that company 'control' for the purpose of determining whether it is a subsidiary.

In Australia, for instance, the accounting standards defined the circumstances in which one entity controls another. For a topic outline on this subject see List of basic Australia topics. Accountancy or accounting is the measurement statement or provision of assurance about financial information primarily used by Lenders managers, In doing so, they largely abandoned the legal control concepts in favour of a definition that provides that 'control' is "the capacity of an entity to dominate decision-making, directly or indirectly, in relation to the financial and operating policies of another entity so as to enable that other entity to operate with it in pursuing the objectives of the controlling entity. " This definition was adapted in the Australian Corporations Act 2001: s 50AA. The Corporations Act 2001 (Cth, sometimes referred to just as the Corporations Act (or informally as the 'Corps' Act is an act of the Commonwealth of Australia that sets out ^[1]

See also

• Associate company
• Consolidation (business)
• Control premium
• Enterprise value
• Equity method
• Goodwill (accounting)
• Mergers and acquisitions
• Minority interest

Business models which feature elements similar to subsidiaries

• Conglomerate (company)
• Zaibatsu
• Keiretsu
• Chaebol

Footnotes

1. ^ Corporations Act 2001 - Sect 50AA from Australasian Legal Information Institute. An associate company (or associate) in Accounting and Business valuation is a company in which another company owns a significant portion of voting shares Consolidation or amalgamation is the act of merging many things into one Control premium is an amount that a buyer is usually willing to pay over the current market price of a company Enterprise value (EV Total enterprise value (TEV or Firm value (FV is an economic measure reflecting the market value of the whole business Equity method in accounting is the process of treating equity investments usually 20–50% in associate companies Goodwill is an Accounting term used to reflect the portion of the book value of a business entity not directly attributable to its Assets and liabilities A conglomerate is a large Company that consists of seemingly unrelated Business sections is a Japanese term referring to industrial and financial business conglomerates in the Empire of Japan, whose influence and size allowed for control over significant A is a set of companies with interlocking Business relationships and shareholdings. Chaebol (alternatively Jaebol, Jaebeol) refers to a South Korean form of business conglomerate. Retrieved 9 September 2006.

© 2009 citizendia.org; parts available under the terms of GNU Free Documentation License, from http://en.wikipedia.org
Dapyx Software network: MP3 Explorer | Ebook Manager | Zenithic