Parent company facts for kids

A parent company is like a big brother or sister company that owns a large part of another company. When a company owns enough of another company's "voting stock," it means they have enough power to make big decisions for that other company. The companies controlled by a parent company are called subsidiaries.

What is a Parent Company?

A parent company is a business that has enough control over another company to guide its choices. This control usually comes from owning more than half of the other company's voting shares. Think of it like a main office that oversees several smaller offices.

How Does a Parent Company Control Others?

When a parent company owns a lot of a subsidiary's voting stock, it can choose who sits on the subsidiary's board of directors. The board of directors is a group of people who make the most important decisions about how the company is run. By choosing these people, the parent company can control the subsidiary's daily activities and its overall direction. This means the parent company can decide things like what products the subsidiary makes or where it sells them.

What is a Subsidiary?

A subsidiary is a company that is owned or controlled by another company, the parent company. Subsidiaries often keep their own names and brands, but their big decisions are made by the parent company. For example, a big car company might have different subsidiaries that make different types of cars or car parts.

Why Do Companies Have Subsidiaries?

Companies create or buy subsidiaries for many reasons. It can help them grow, manage risks, or enter new markets.

Growing the Business

A parent company might buy a subsidiary to expand its business. For instance, a food company might buy a smaller company that makes a popular snack. This helps the parent company sell more products and reach more customers.

Managing Risks

Having different subsidiaries can help a parent company spread out its risks. If one part of the business faces problems, the other parts might still be doing well. This makes the whole company stronger and more stable.

Entering New Markets

Sometimes, a parent company buys a subsidiary to enter a new market or industry. If a company wants to start selling toys, it might buy an existing toy company instead of starting from scratch. This can be faster and easier than building a new business from the ground up.

Examples of Parent Companies and Subsidiaries

Many big companies you know are actually parent companies with lots of subsidiaries.

• The Walt Disney Company is a parent company. It owns many famous subsidiaries like Pixar Animation Studios, Marvel Entertainment, and Lucasfilm (which makes Star Wars movies).
• Alphabet Inc. is the parent company of Google. It also owns other companies like YouTube and Waymo (which works on self-driving cars).
• Meta Platforms is the parent company of Facebook, Instagram, and WhatsApp.

These examples show how parent companies can control many different brands and businesses under one big umbrella.

See also

In Spanish: Empresa matriz para niños