Scroll Top

search-icon
    drop-arrow

    Wholly Owned Subsidiary

    Introduction

    A wholly-owned subsidiary is a corporation with 100% shares held by another corporation, the parent company. Although a corporation may become a wholly-owned subsidiary through take over by the parent company or split off from the parent company. The parent company holds a normal subsidiary from 51% to 99%.

    If lower costs and risks are desirable, or if complete or majority ownership can not be obtained, the parent company may create a subsidiary, associate, or joint venture in which it would own a minority stake.

    How It Works?

    As the parent company owns all the shares of a wholly-owned subsidiary, minority shareholders are not present. The subsidiary works with the parent company's approval and may or may not have direct input to the activities and management of the subsidiary. That could turn it into an unconsolidated subsidiary.

    A wholly-owned subsidiary, for example, maybe in a country other than that of the parent company. The subsidiary most likely has its own executive structure, products, and customers. Having a wholly-owned subsidiary may allow the parent company to sustain operations in different geographic areas and markets, or separate sectors. These factors help to cope up with the changes in the market or geopolitical and trade practices.

    Advantages & Disadvantages

    Although a parent company has operational and strategic control over its wholly-owned subsidiaries, and acquired subsidiary with a strong operating history overseas typically has less overall control.

    Furthermore, the parent company may apply its own data access and protection directives to the subsidiary as a way of reducing the risk of losing other companies intellectual property. A parent company directs how its wholly-owned subsidiary's assets are invested.

    The establishment of a wholly-owned subsidiary, however, can result in the parent company paying too much for assets, especially if other companies bid on the same business. The parent company often assumes all the risk of owning a subsidiary, and that risk may increase if local laws vary considerably from the laws in the country of the parent company.

    Popular Topics

    Latest Articles

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption