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What is a Subsidiary? A Comprehensive Legal Definition
Definition & Meaning
A subsidiary is a company that is either fully or partially owned and controlled by another company, often referred to as the parent company. This relationship allows the parent company to influence the operations and decisions of the subsidiary. In the context of banking, a subsidiary can also refer to service corporations that are owned, either wholly or in part, by an insured depository institution or any subsidiary of such a service corporation.
Table of content
Legal Use & context
The term "subsidiary" is commonly used in corporate law and business regulations. It is relevant in various legal contexts, including mergers and acquisitions, corporate governance, and financial reporting. Understanding the structure of subsidiaries is essential for compliance with laws governing corporate entities, as well as for tax implications and liability issues. Users may find it beneficial to utilize legal templates from US Legal Forms to create necessary documents related to subsidiaries, such as formation documents or contracts.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A large technology firm, Tech Innovations Inc., owns a subsidiary called Smart Gadgets LLC, which specializes in consumer electronics. Tech Innovations Inc. controls the strategic direction and financial decisions of Smart Gadgets LLC.
Example 2: A bank, Secure Bank Corp., has a subsidiary named Secure Insurance Services, which provides insurance products. Secure Bank Corp. oversees the operations and policies of Secure Insurance Services. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Subsidiary Regulations
California
Requires specific disclosures for subsidiaries in financial reports.
Delaware
Known for business-friendly laws regarding the formation and operation of subsidiaries.
New York
Imposes additional regulatory requirements for financial subsidiaries.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Parent Company
A company that owns a subsidiary.
The parent company has ownership and control, while the subsidiary is the owned entity.
Affiliate
A company that is related to another company, usually through ownership.
Affiliates may not be controlled or owned by the other company, unlike subsidiaries.
Common misunderstandings
What to do if this term applies to you
If you are considering forming a subsidiary or are involved with one, it is essential to understand the legal implications and requirements. You may want to:
Consult with a legal professional to ensure compliance with state and federal laws.
Explore US Legal Forms for templates that can assist in forming a subsidiary or drafting necessary agreements.
Review your parent company's policies to understand the control and reporting obligations regarding the subsidiary.
Find the legal form that fits your case
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