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When A Company Owns Another Company

A company owned by another company is called a subsidiary. Once it’s created, the initial company then becomes known as the parent, or holding company.

Why Would A Company Want to Own A Company?

Establishing a subsidiary company can come with financial incentives, including tax benefits and/or diversified risks and assets. Subsidiary companies are their own separate legal entity, which means they can help a company establish limited liability.

How do I Create a Subsidiary?

You would create a subsidiary company the same way you would form a traditional Corporation or LLC. The only difference is the parent company would end up being the sole shareholder or member of the subsidiary, rather than an individual or group of individuals.

Something to Keep in Mind When Creating a Subsidiary:

While a subsidiary may limit financial risk for the parent company, setting up a subsidiary may also come with some drawbacks. Because a subsidiary is its own independent company, this can require more time and cost from the parent company. It also means that the parent company does not necessarily exert total control over its subsidiary, which is something to keep in mind if your subsidiary is a business in its own right—especially since the parent company can be held liable for any illegal activity within its subsidiary.

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