what is a subsidiary

A subsidiary is a company that is owned or controlled by another company, known as the parent company or holding company. The parent company usually owns more than 50% of the subsidiarys stock, giving it a controlling interest. Subsidiaries are separate legal entities from their parent companies, which means they have their own liabilities, taxation, and governance. They can sue and be sued separately from their parent companies, and their obligations are typically their own and not the responsibility of the parent company. Subsidiaries can be wholly owned, meaning the parent company owns 100% of the subsidiarys stock, or partially owned, where the parent company owns more than 50% but less than 100% of the subsidiarys stock. Subsidiaries are often used by companies to expand into international markets, obtain tax advantages, limit losses, and maintain brand independence. They are reported on the parent companys consolidated financial statements. A subsidiary can have its own subsidiaries, and together with the parent company, they form a corporate group. Subsidiaries are beneficial for mitigating risk and achieving greater operational efficiency.