Subsidiary facts for kids

A subsidiary is like a smaller company that is owned and controlled by a bigger company, called the parent company. Even though the subsidiary has its own goals and often works on its own, the parent company still makes the big decisions.

A subsidiary is different from a company's division. A division is more like a department within the parent company. It usually works very closely with the parent company and often shares the same name and goals. A subsidiary, on the other hand, can have a completely different name and focus.

For example, YouTube is a subsidiary of Google. Google is mostly known as a search engine, while YouTube is a huge video sharing website. They do different things, and YouTube has its own name and logo. But Google still owns and controls YouTube.

On the other hand, Google Videos used to be a division of Google. It was a search engine specifically for videos, which matched Google's main purpose as a search engine. As a division, it used Google's name and logo.

What is a Subsidiary?

A subsidiary is a business that is owned or controlled by another company. This bigger company is known as the parent company. Think of it like a family: the parent company is the main adult, and the subsidiary is a child company that it looks after.

The parent company usually owns more than half of the subsidiary's voting shares. This means the parent company has enough votes to choose the subsidiary's leaders and make important decisions.

Why Companies Have Subsidiaries

Companies create or buy subsidiaries for many reasons:

• To grow bigger: A company might want to expand into new areas or countries without changing its main business. A subsidiary can help with this.
• To manage different businesses: If a company does many different things, it can put each type of business into a separate subsidiary. This helps keep things organized.
• For legal reasons: Sometimes, having separate subsidiaries can help protect the parent company from risks. If one subsidiary faces a problem, it might not affect the entire parent company.
• To use different brand names: A subsidiary can have its own name and brand, which helps it appeal to different customers or markets.

Subsidiary vs. Division: What's the Difference?

It's easy to mix up subsidiaries and divisions, but they are quite different:

• Independence: A subsidiary is a separate legal business. It can sign its own contracts, own its own property, and even be sued on its own. A division is not a separate legal business; it's just a part of the main company.
• Name and Brand: Subsidiaries often have their own unique names and logos, like YouTube does. Divisions almost always use the parent company's name and brand.
• Purpose: While a subsidiary's purpose might be different from its parent company's, a division's purpose is usually very similar to the parent company's main goal.

For example, a car company might have a subsidiary that makes electric scooters. The scooter company has its own name and focus. But a division of the car company might be the "Sports Car Division," which still makes cars under the main company's brand.