Wholly-Owned Subsidiary - Explained
Subsidiaries and Wholly Owned Subsidiaries
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is a Wholly-Owned Subsidiary?
A wholly owned subsidiary is a business entity whose equity (ownership interest) is held or owned by the parent company.
- Example: Company A (a corporation that issues common stock as its form of equity) is a wholly owned subsidiary of Company B (the parent company) if Company B is the sole owner its common stock.
If the parent firm owns between 51% to 99% of the company's stock, the company is considered a "subsidiary", but not a wholly-owned subsidiary.
A Little More on What is a Wholly Owned Subsidiary
No minority shareholders exist in case of a wholly owned subsidiary. The parent company has control of all the subsidiary company shares.
Interesting, the parent company may or may not have anything to do with the activities and managerial tasks of the subsidiary. For instance, it is possible that a wholly owned subsidiary and a parent company operate independently except for the routine reporting of performance.
Advantages and Disadvantages of a Wholly Owned Subsidiary
- Ability to exercise control or allow company autonomy
- Strategic partnership between parent and subsidiary operations (Vertical/Horizontal Integration)
- Increased resources for the subsidiary (financial, knowledge, support staff, marketing, etc.)
- Regulatory risks (Securities Law, Antitrust Law)
- Increased complexity of management
- Potential undue influence by parent over subsidiary
- Cultural discrepancies between companies
Examples of Wholly Owned Subsidiaries
One of the most famous examples of a wholly owned subsidiary will be Volkswagen AG that fully owns and controls the operations of Volkswagen Group of America Inc. and its distinct brands such as Audi, Bugatti, Volkswagen, etc. Another example will be that of The Walt Disney Company that wholly owns Marvel Entertainment and EDL Holding Company LLC. Starbucks Corp completely owns Starbucks Japan. Key Takeaways
- Business Entities (Intro)
- Why is studying business entities important?
- Considerations When Forming a Business Entity
- Holistic (Detailed) Overview of Setting Up a Business Entity
- What are Business Entities?
- What is a Closely-held vs Publicly-held Business?
What are the main types of business entity?
- What are the primary characteristics of business entities?
- What is Maintenance of a business entity?
- What is Control of a business entity?
- What is Compensation of business owners?
- What is Taxation of a business entity?
- What is Sales & Use tax?
- What are payroll and self-employment taxes?
- What are the major characteristics of a Sole proprietorship?
- Uniform Partnership Act
- Uniform Limited Partnership Act
- Partnership Agreement
- At-Will Partnerships
- Responsibilities of Partners to the Partnership
- Silent Partner
- Funding the Partnership
- How are Partners Compensated
- Splitting Equity in an Industrial Partnership
- What are the main characteristics of a Limited liability partnership?
- What are the main characteristics of a Limited liability company?
- Forming an LLC
- Articles of Organization
- Operating Agreement or LLC Agreement
- Why You Need an LLC Agreement
- LLC Compensation of Members
- LLC Taxation
- Converting to an LLC
- What are the main characteristics of a Corporation
- Articles of Incorporation
- What to include in the Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter's Rights
- What are the requirements to be an S Corporation?
- Non-Profit Organization
- NonProfit Business Entities
- Private Foundation
- A Detailed Explanation of the Sole Proprietorship
- Taxation of Sole Proprietorship
- A Detailed Explanation of the General Partnership
- 50/50 Partnerships: Never a Good Idea
- Publicly-Traded Partnerships
- A Detailed Explanation of the Limited Liability Company
- A Detailed Explanation of the Corporation
- Keepwell Agreement (Letter of Comfort)
- Personal Service Corporation Definition
- A Detailed Explanation of the Non-Profit Entity
- Public Limited Company (UK)