Editing Subsidiary (section)

==Details==
{{more references|section|date=July 2022}}
Subsidiaries are separate, distinct [[commercial law|legal]] entities for the purposes of [[tax]]ation, [[regulation]] and [[Legal liability|liability]]. For this reason, they differ from [[division (organization)|divisions]] which are businesses fully integrated within the main company, and not legally or otherwise distinct from it.<ref>{{cite book |last1=Lehman |first1=Jeffrey |last2=Phelps |first2=Shirelle |title=West's Encyclopedia of American Law, Vol. 9 |date=2005 |publisher=Thomson/Gale |location=Detroit |isbn=9780787663766 |page=387 |edition=2}}</ref> In other words, a subsidiary can sue and be sued separately from its parent and its obligations will not normally be the obligations of its parent. However, creditors of an insolvent subsidiary may be able to obtain a judgment against the parent if they can [[Piercing the corporate veil|pierce the corporate veil]] and prove that the parent and subsidiary are mere [[alter egos]] of one another. Thus any copyrights, trademarks, and patents remain with the subsidiary until the parent shuts down the subsidiary.

Ownership of a subsidiary is usually achieved by owning a majority of its [[share (finance)|shares]]. This gives the parent the necessary votes to elect their nominees as directors of the subsidiary, and so exercise control. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. There are, however, other ways that control can come about, and the exact rules both as to what control is needed, and how it is achieved, can be complex (see below). A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a [[corporate group|corporate]], although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership.

A parent company does not have to be the larger or "more powerful" entity; it is possible for the parent company to be smaller than a subsidiary, such as [[Danjaq|DanJaq]], a closely held family company, which controls [[Eon Productions]], the large corporation which manages the [[James Bond]] franchise. Conversely, the parent may be larger than some or all of its subsidiaries (if it has more than one), as the relationship is defined by control of ownership shares, not the number of employees. 
 
The parent and the subsidiary do not necessarily have to operate in the same locations or operate the same businesses. Not only is it possible that they could conceivably be competitors in the marketplace, but such arrangements happen frequently at the end of a [[hostile takeover]] or voluntary merger. Also, because a parent company and a subsidiary are separate entities, it is entirely possible for one of them to be involved in legal proceedings, bankruptcy, tax delinquency, indictment or under investigation while the other is not.<ref>{{Cite web |title=Subsidiary |url=https://corporatefinanceinstitute.com/resources/accounting/subsidiary-definition/ |access-date=2024-06-21 |website=Corporate Finance Institute |language=en-US}}</ref>