What is a Wholly-Owned Subsidiary?

A subsidiary is a separate company that is owned by a larger (parent) company. If the parent firm owns between 51% to 99% of the company's stock, the company is considered a "subsidiary".

What is a Wholly-Owned Subsidiary?

A wholly owned subsidiary is a business entity whose equity (ownership interest) is entirely held or owned by the parent company. If the parent firm owns 100% of the company's stock, the company is considered a "subsidiary".

• 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. 

Management of a Subsidiary

A 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

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