what is Subsidiary

A subsidiary is a distinct business entity that is owned or controlled by another company, known as the parent or holding company. Here are the key characteristics and implications of a subsidiary: 1. **Ownership and Control**: The parent company has a significant stake, often a majority of the shares, which gives it control over the subsidiary's operations and decision-making. 2. **Legal Independence**: Despite being under the control of the parent, a subsidiary is a separate legal entity with its own statutes, governing body, and administrative structure. 3. **Financial Reporting**: Subsidiaries prepare their own financial statements, which are then consolidated into the financial statements of the parent company. 4. **Risk Management**: Subsidiaries can be used to isolate and manage financial and operational risks. The parent company is generally protected from the subsidiary's liabilities. 5. **Market Expansion**: Subsidiaries can provide access to new markets and customer bases, allowing the parent company to diversify and expand its operations. In summary, a subsidiary is a strategic tool used by parent companies to gain control, manage risks, and expand their operations while maintaining a degree of independence and legal separation.