A subsidiary is a company controlled by another usually a large corporation. When that control or ownership is not shared, it is termed a wholly-owned subsidiary. Subsidiaries are distinct legal entities for purposes of taxation and other forms of regulation. A large holding company such as Berkshire Hathaway, Time Warner, Citigroup will usually organize all of their holdings into subsidiaries, sometimes with multiple levels of containment ([1]). Subsidiary is different from Division/Business Unit which is part of the main company. A company in the broadest sense is an aggregation of people who stay together for a common purpose. ... A corporation is a legal entity (distinct from a natural person) that often has similar rights in law to those of a Civil law systems may refer to corporations as moral persons; they may also go by the name AS (anonymous society) or something similar, depending on language (see below). ... A holding 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. ... Berkshire Hathaway (NYSE: BRKa) is a company headquartered in Omaha, Nebraska, USA, that oversees and manages a number of subsidiary companies. ... Time Warner Inc. ... Citigroup Inc. ...
Companies must be especially mindful of the rules governing qualified plans, such as pensions or profit-sharing vehicles subject to federal laws.
Companies and their CPAs also must be careful when booking intercompany transfers to and from subsidiaries that are not being included in a consolidated tax return, as would be the case with a less-than-80%-owned subsidiary or most foreign subsidiaries.
For most companies expanding their operations to include new lines of business or to operate in new locations, creating a subsidiary is a cost-effective undertaking that can yield substantial tax and liability benefits.
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