In the case when the company's activity is progressive and acquires an increasing dynamics of development, there may be a need to expand the business and then subsidiaries are created.

The very concept of a subsidiary indicates that this company was created not as an independent unit, but as an enterprise subordinate and accountable to the main one. Subsidiaries arise on the basis of property owned by the parent company. Also, the management team and the basis of the team are people who came from the parent company.

She is also the holder of a significant stake. However, a subsidiary is an independent legal entity that plans its activities, conducts its personnel policy And responsible for debts.

A network of subsidiaries created by the parent company and subordinate to it is called a holding.

The formation of subsidiaries contributes to the solution of the following problems:

1. Expansion of the range of manufactured goods or services and a corresponding increase in sales markets, called diversification. The creation of specialized subsidiaries and the transfer of the most profitable business lines to them leads to an increase in the competitiveness of the entire company.
2. Extension foreign economic relations and the possibility of using more favorable tax and customs conditions in the activities of subsidiaries established abroad.
3. Claims management. Transfer of risky operations to a subsidiary limited liability raises financial stability the parent company and the holding as a whole
4. Creation of specially licensed types of activities in the parent company (banking, insurance, etc.)
5. Rationalization of management. Less significant managerial functions are transferred to the subsidiary company, thereby optimizing the activities of the parent company, increasing its productivity and efficiency.
6. Optimization of tax and financial planning, decrease financial loss through the use of transfer deals. There is a redistribution of income and losses between companies, attracting additional investment.

Features of creating a subsidiary and managing it

The company is considered established from the moment of its registration in the Unified State Register of Legal Entities (USRLE). The persons who signed the agreement on the establishment of the company are legally responsible for the activities of the company and its debts.

In the process of creating a new legally independent unit, which is a subsidiary, the parent company seeks to maintain a 100% participation in it, since only with the maximum ownership of shares is it possible to unconditionally manage a subsidiary. The presence of a 50% stake requires the approval and support of other shareholders in decision-making. Time is spent on holding meetings, on the appropriate formulation of decisions. The possibility of making a decision unfavorable for the parent company cannot be ruled out.

In the presence of a 100% stake, an order from the general director of the holding is sufficient to make decisions on the management of a subsidiary. A few years ago, the issue of creating subsidiaries was exclusively the prerogative of the board of directors, and this was the case for a long time, until the law was amended to allow granting the right to create subsidiaries. to CEO holding.

True, these amendments open a window for fraud, allowing you to divert assets from the primary company to the side. Therefore, when creating a holding, it is advisable to retain the right to create subsidiaries for the board of directors by including this clause in the charter of the holding.

Ways to create a subsidiary

Consider several ways to create subsidiaries:

1. Creation of a new legal unit, including through spin-off.
2. Acquisition of shares (stakes) in already operating companies. Such a merger, as a rule, is beneficial to both parties, since the parent company, pursuing its goals, gives impetus to the development of the acquired company, strengthens it by investing its own funds.

In economic and financial activities parent and subsidiaries, there are situations associated with the need to transfer assets from one (parent company) to another.

Such a transfer of assets from one balance sheet to another can be carried out in the following ways:

1. Free transfer.
2. Purchase and sale.
3. Rent (leasing).
4. Increase authorized capital in a subsidiary through the transfer of property.

As a rule, subsidiaries are created according to the following scheme. A new (subsidiary) company is registered as a limited liability company with an authorized capital within 100 minimum wages.

The parent company pays the required amount of the authorized capital, and leases the property and real estate. Companies resort to such a measure when, for some reason, they do not consider it appropriate to transfer highly liquid assets to their daughter.

Differences between a subsidiary and a branch

The parent company, along with subsidiaries, has the opportunity to open its branches. Subsidiaries also have the right to establish branches for the purpose of expanding and promoting their business.

A few words about what a branch is. The word branch is of Latin origin and means filial. This is a separate branch of a legal entity (enterprise, bank, company, etc.) created by this legal entity and completely subordinate to him. The branch is also located outside the territory of the legal entity.

However, the branch carries out its activities on behalf of the founder, and on behalf of the founder. The branch is obliged to coordinate all its decisions and all its activities with the management of the head enterprise. The management of the branch is appointed by the legal entity that created this branch. Thus, a branch depends on its founder both economically and legally.

Branch:

1. Not a legal entity.
2. The parent company is fully responsible for the activities of the branch.
3. The branch is managed by a senior manager (manager) appointed by the management of the head enterprise.

Subsidiary company:

1. Is a legal entity
2. The parent company is not responsible for the activities of the subsidiary.
3. The subsidiary itself decides at the meeting of shareholders who will manage it.

Legally independent business units, such as subsidiaries, respond more flexibly to market changes than branches.

Tax aspect

From the point of view of the tax aspect, the parent and subsidiaries are interdependent for tax purposes, that is, they are able to influence economic activity each other. And the interdependence of the parent and subsidiaries gives the fiscal authorities grounds to review and control the correctness of pricing for transactions, to charge and revise taxes and markups in accordance with the current market price rate at the time of the transaction.

It should be added that since the beginning of 2008 there has been a significant income tax relief on income from a subsidiary. If the parent company has a subsidiary for more than a year, and has 50 or more percent of the shares of a subsidiary, then it is exempt from paying taxes on dividends received from the subsidiary. This benefit is valid on the condition that the subsidiary is not registered in an offshore zone, and the share of the parent company in the authorized capital of the subsidiary is at least 500 million rubles.

Management Accounting

For the successful conduct of a business, whether it is a workshop enterprise, a separate plant or an entire corporation, management accounting is required, which is maintained in order to identify and calculate:

1. Cost of production and advertising of products.
2. Demand for a particular product in the market.
3. Sales income, etc.

If a shop worker needs a school notebook and a calculator to keep such records, then the largest corporations have created data centers with powerful servers that store and process the necessary information.

Often, company executives have little idea of ​​which of the areas in their business brings the maximum profit, what are the costs of creating a manufactured product and what they consist of. Management accounting provides information that answers these and other questions and is necessary to develop a strategy that contributes to the effective management of a company.
Ideally, there should be two methods management accounting: external and internal.

Information on external accounting is open and provided to the tax authorities, and financial institutions, investors and shareholders, suppliers and consumers. This includes information on the current expenses and income of the enterprise, accounts payable and receivable, the size of investments and income from them, etc.

International business practice has developed accounting standards for maintaining and providing information on external accounting. If we talk about internal accounting, then the management itself decides whether the company needs such accounting or not. Internal accounting, for example, includes production costs, which, in the process of analysis and compilation, are grouped according to type, place of their distribution and carriers of these costs.

Quality management accounting is an important component in running a business, and for its execution you need the right equipment and people. The cost of creating management accounting will pay off many times over, because whoever owns the information owns the world. And a businessman, especially a leader, needs to keep abreast, be aware of everything that happens in the company.

Subsidiary reporting

There is an important requirement for the creation of annual reporting in the holding: the level of income in subsidiaries, their financial and property status must be presented in the report in conjunction with the parent company. That is, the holding is obliged to submit a general financial statement reflecting the situation in subsidiaries. These statements include consolidated items of assets, promissory notes, profits and expenses, and cash flows.

When compiling such reporting, problems arise when the daughters are abroad. It is not always possible to make a report for a specific day. IN foreign companies reporting is done in the currency of the country where the subsidiary is located. Sometimes the reports of daughters may differ in the structure and content of the paragraphs. How to be? International practice answers this question as well. Reporting is carried out in several stages through the preparation of additional balance sheets, from which it then becomes possible to create a report in accordance with the requirements of the parent company.

First stage- rearrangement of balance sheets. The need for it may arise, since the requirements of the parent company may differ from the conditions for reporting in the country where the subsidiary is located.

Then the consistency of the balance sheet items approved in the parent company is compared. If necessary, corrections are made in the assessment that constitutes the balance of items. And finally, balance sheet items are recalculated in the currency of the country where the main company operates.

However, this requirement for consolidated reporting has several exceptions.

The parent company may not provide consolidated annual accounts in cases where:

1. She herself is someone's daughter, and her owners agree that she will not provide consolidated financial statements.
2. Its equity or debt securities are not traded on the securities market and the company does not plan to issue such securities.

A subsidiary is included in the consolidated financial statements from the moment of its creation or acquisition by the parent company.

The concept of "subsidiary" was introduced in the Civil Code of the Russian Federation in 1995. Since then the legal status given subject market was regulated by Art. 105 Civil Code RF. Changes were made in 2014. Today legal status these organizations is determined by Art. 67.3 of the Civil Code of the Russian Federation.

Peculiarities

The organization will be recognized subsidiary if another partnership or society has the right to determine the decisions that are made by such a company. This link is based on one of the following circumstances:

• predominant participation in the authorized capital;
• on the basis of an agreement;
• otherwise legally (this provision is contained in the charter of a subsidiary company, representatives of the main company are included in the list of participants, etc.).

The legislator defined these conditions in general view. For example, he did not approve minimum size the share that the parent company must have in the capital of the subsidiary.

The peculiarity of this type of organization is that they can exist in any organizational and legal form, for example, LLC, JSC, etc.

The specificity lies in the special relationship with the main societies, which are sometimes referred to as maternal. For example, they may influence the actions of subsidiaries.

Specially regulated material liability:

• the subsidiary is not liable for the debts of the parent company;
• the subsidiary and the main organization are jointly and severally liable for the debts that were formed under the transaction concluded as a result of the decision of the parent company;
• the parent company will be subject to subsidiary liability if its actions or decisions have led to the insolvency of the subsidiary.

These rules are enshrined in Art. 67.3 of the Civil Code of the Russian Federation.

Opportunities and responsibilities

A subsidiary is an organization that has its own capital and property. It concludes contracts and performs other functions as a full-fledged market participant.

In accordance with the Civil Code of the Russian Federation, a subsidiary is not liable for the debt of the parent company. She, in turn, can be brought to subsidiary or joint liability in some cases. For example, losses in a transaction initiated by the parent company are reimbursed by either the parent or subsidiary.

In this case, they are jointly and severally liable. More details are given in Art. 322 of the Civil Code of the Russian Federation. With joint and several liability the creditor may demand performance of obligations from all debtors jointly or from any of them separately. If one organization does not implement them, then he can apply to another.

Subsidiary liability of the parent organization occurs if its actions and decisions have led to the insolvency of a subsidiary. According to Art. 399 of the Civil Code of the Russian Federation in such a situation, principal debtor. It is the first requirement. The parent firm must repay that portion of the subsidiary's debt that it is unable to cover with its own assets.

Influence of the parent firm

The main feature of the subsidiary is that its decisions may be influenced by another organization. Such relationships are allowed for various reasons.

The parent company does not always have a predominant share in the authorized capital of the subsidiary.

Such relationships may contractual nature. For example, a controlled company receives the right to use technologies for the production of a certain object, but it must coordinate the sale of goods with the main company.

A subordination clause may be included in the charter of a subsidiary. Such companies have their own governing bodies, which means that control should have a certain consolidation. The charter may stipulate what types and amounts of transactions must be carried out with the approval of the board of directors or the general meeting.

As a result, the parent organization will not take part in operational management, but will be able to influence the adoption of strategically important verdicts. This rule is relevant for the main companies that have several subsidiaries.

Order and methods of opening

The creation of a subsidiary organization can be done in two ways. First - by registering a new company or partnership. In such a situation, a standard procedure is followed, which includes next steps:

• making a decision on the creation of a new market entity, drawing up a verdict in paper form (protocol);
• preparation of documents for registration, execution of an application for, drafting a charter;
• transfer to the tax office for registration of a new company;
• issuance of a verdict by the registration authority.

If the decision is positive, the subsidiary can start its activities, and if it is negative, it can file a complaint against the decision of the tax inspectorate for illegal refusal.

The second way is "absorption". This happens when a company created as an independent company becomes dependent on another market participant. Usually, this is due to financial difficulties.

There are quite a few examples of such "absorption". For example, the Volkswagen concern turned many auto-building companies in Europe into subsidiaries in a similar way.

Once the firms have mutually agreed on such a decision, they must the following actions:

• properly fix the procedure and tools by which the parent organization will be able to influence the subsidiary (for example, draw up an agreement or change the charter);
• the subsidiary must have all the necessary details, including its own current account, legal address, seal;
• it is necessary to select the managers of the subsidiary, including the director and chief accountant;
• apply to the state chamber with the necessary documents (certificate from the bank on the state of the account, characteristics for officials, information about the founders, fund, charter);
• obtain a certificate of registration of a subsidiary.

A subsidiary is often compared to branches and representative offices of legal entities. These concepts have common features, but at the same time are very different from each other.

Branches and representative offices are mentioned in Art. 55 of the Civil Code of the Russian Federation. This article presents legal definitions of such concepts:

• representation — separate subdivision company, which is located outside its location, represents the interests of the company and implements their protection;
• branch- a separate division of the company, which is located outside its location, exercises all its powers or part of them (including those assigned to representative offices).

In accordance with Part 3 of Art. 55 of the Civil Code of the Russian Federation and branches are not legal entities. They do not have their own property and management bodies. All this is provided by the main company or partnership. Managers manage branches or representative offices on the basis of a power of attorney. Information about subordinate structures must be specified in .

Thus, the main difference is that subsidiaries are independent firms that are full market participants. They have their own property, are responsible for their actions, and have their own governing bodies. The subsidiary operates on the basis of its charter.

Main firm Always will be responsible for the obligations of its representative offices and branches. Any penalties apply to her. The parent organization always acts in court on behalf of its branches and representative offices.

At the same time, the law defines cases when it will be held liable for the transactions of a subsidiary. Moreover, it can be solidary and subsidiary, depending on the specific circumstances of the case.

The procedure for creating these forms of dependent market entities also differs. So, branches and representative offices are formed by the decision of the main organization. To create them, appropriate changes are made to the charter of the company.

Subsidiaries are founded in the same manner as other legal entities.

The decision to create company founders. A subsidiary company can start its activities when tax office decide on its registration.

Advantages and disadvantages

Among virtues subsidiaries are as follows:

• in case of bankruptcy, the debts will be repaid by the main firm;
• the parent organization is also responsible for the budget and expenses;
• the absence of tough competition, which is conducted not by a subsidiary, but by the main enterprise.

The main disadvantage of a similar form is the full accountability of the parent company. In such conditions, it can be problematic to develop an organization. The entire capital is managed by the parent company, which means that only it can decide on the possibility of financing certain areas. In addition, there is a risk of closing a subsidiary due to the liquidation of the main company.

For the parent organization, this form of interaction may be associated with additional costs, for example, in case of unprofitable transactions or insolvency.

So, a subsidiary is a popular way of organizing interaction between two market entities. Thanks to this model, smaller firms can stay afloat at the expense of large organizations. Those, in turn, expand even more, increasing incomes and the number of consumers.

Mergers and acquisitions of companies are described in detail in this video.

A subsidiary company is a legally free organization that has the right to control production, supply, development of new technologies, sale of shares, and so on, however, a subsidiary company must give all its income to the parent company, and this company, in turn, allocates funds for the wages of workers , on equipment, production and various expenses. Essentially, the condition of a subsidiary depends on financial position head office of the parent company.

From a legal point of view, a subsidiary is practically a free entity funded by another company, however, today we see that the parent company has a huge influence on its subsidiary. That is, he changes leaders, putting his people, indicates the path of the downed goods and controls production.

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Changes in control took place in 1994, until that time the subsidiary, from the legal side, was completely controlled by the parent company only by finances, however, it was in 1994 that a law was adopted that states that a subsidiary, which is also a business company, is a created or a company acquired by another company.

Such a society has the right to dictate the conditions of production, however, at the same time it has a huge dependence on the mother community. As a rule, disagreements never arise between the child and parent communities, because they are directly dependent on each other.

In the event of the bankruptcy of a subsidiary, the parent company must take all the blame for this incident. In the event that the power sees that financial condition head office can fully financially support its subsidiary, then it has the right to force it to do so.

Opening a subsidiary, step by step instructions

To date, opening a child community is not difficult, for this you will need:

1. All documents of the ruling company.
2. Charter of the subsidiary.
3. A legally formalized decision to establish a subsidiary.
4. You will need an application form p11001.
5. It is also very important to have a document that indicates that your company does not have any debt.

There are two ways to create a child community:

Method number 1 instruction

1. To get started, draw up a special charter for the subsidiary and indicate in it all the conditions you need. If the company has several shareholders of the main capital, then you should create an agreement that describes the distribution of shares between them.
2. It is necessary to draw up a protocol among the founders. This protocol must legally confirm the fact of the creation of a subsidiary.
3. When creating any enterprise, including a subsidiary, you need to specify its location and contact details. Such a document has the right to create only the director of the main community, which will continue to control the child.
4. It is worth noting that before registering a subsidiary, you need to get a certificate that indicates that the main office does not have any kind of debt. A subsidiary is registered only when all debts of the parent community are repaid. If the subsidiary incurs losses due to underfunding by the heads of the head office, then through the court, the parent company will be forced to incur losses in favor of its subsidiary.
5. Form p11001 must be completed in full.
6. After all the above documents are completed, Chief Accountant and all collected Required documents, you need to submit all the papers for consideration to the tax authority in which your company is actually registered. After all contracts are ready, the subsidiary company can start its existence.

Method number 2 instruction

There are times when a subsidiary is not created, but assigned according to mutual consent. In the common people, this can be called "Absorption". Everything happens very simply: one company ruins another, after which, for a small amount, it appropriates it for itself. Today, there are a lot of companies that absorb enterprises.

Take, for example, the automotive concern Volkswagen Group, which over the years of its existence has absorbed almost the entire automotive business in Germany and Europe.

The great concern has a well-established scheme, for example, let's take the takeover of the automaker Audi: When Audi experienced financial difficulties at the end of the 20th century, it was kept afloat by the production of only one car, but Volkswagen creates a car of the same class, which is cheaper, more beautiful, more reliable and better in technical characteristics.

Naturally, motorists will buy a Volkswagen product, not an Audi.

Such a scheme is something unprofitable for the absorbing company, however, this contribution completely illuminates Audi, as a result of which it asks for financial assistance from Volkswagen, after which it becomes a subsidiary, to which its directors are placed.

There are many such examples, for example, take the same car industry: today there are three concerns: Volkswagen, Toyota, General Motors. They control 85 percent of the entire automotive world. Few would think, however, almost all well-known brands belong to just these concerns.

Well, whether you are absorbing a company or simply agreed on everything by mutual agreement, you must do the following:

1. First you need to choose the direction of the subsidiary, that is, give detailed instructions by production. It should be noted that the production of a subsidiary may differ from that of the parent community.
2. The subsidiary is an independent entity, however, the rules are still dictated by the parent community, so a detailed charter should be developed regarding the subsidiary community.
3. According to the law, the acquired company must have its seal, its bank account, its address and its registered office. individual so take care of all that.
4. Decide on the choice of director and accountant in the controlled community. Agree with them all agreements regarding profits.
5. You need to contact the govt. Chamber and submit an application with the following documents: A bank statement about your account, official characteristics of the affiliated community officials, the charter you signed, a letter of guarantee in which the address of the affiliated community is indicated, information about the founder must be provided in writing, a certified copy of the act of acceptance - fund transfers, certified copies of payment transactions.
6. The last step is simply to obtain a certificate of registered subsidiary, after the company is registered, it can begin its official duties.

Pros and cons of a subsidiary:

pros

1. The subsidiary does not have to worry about bankruptcy, as the parent company is obligated to pay off any debts of its company.
2. You should not calculate the budget and expenses of the company, because all this responsibility is assumed by the parent community.
3. There is no need to be afraid of competitors, because the parent company is personally worried about them.

Minuses

1. Of course, the main disadvantage is the lack of freedom. A subsidiary must produce what will be imposed on it! No control over supplies, production and finances. With such conditions it is very difficult to develop technically.
2. The entire capital is under the control of the parent community, so it is difficult for you to invest in the development of a subsidiary. The parent community allocates some capital, which is fully distributed.
3. If there are still enterprises under the authority of your parent community, then in the event of their bankruptcy, it must compensate for all losses, so the money will be allocated from the earnings of another subsidiary, which will actually provide several enterprises with its production. But if the bankruptcy is too severe, and it is the office of the parent community that goes bankrupt, then, most likely, the subsidiary will be closed, since there will be no money to finance it. The main salvation will be either sponsors or some other parent company.

tax accounting

A subsidiary company is obliged to pay taxes to the state, however, in the same way as the parent organization sponsors this community. There are cases when a subsidiary company is indebted to the office of the parent company.

In such cases, there are several developments of events, among which:

• the closure of a subsidiary (in the event that the debt is too large);
• reducing the capital of a subsidiary, while the pace of production should not fall;
• debt forgiveness;

The most common option is the third, because the subsidiary does not have its own capital, so all the debt was formed due to underfunding from the parent community.

Forgiveness of the debt of a subsidiary is a legal process that is quite legal and transparent.

What is the difference between a subsidiary and a branch?

A subsidiary is a legal entity, all its actions, such as contracts and various important decisions, must be agreed with the parent company in the form of a deal. A subsidiary may be located exclusively in the region in which its "Mother" is located.

The branch is not a legal entity, it deals only with those cases that main company. Due to the fact that the branch is not a legal entity, all transactions are executed on behalf of the main enterprise. It should also be understood that a branch can be located not only in a different region from the main company, but also located on the territory of other states.

Every entrepreneur, as well as the founder, sooner or later has a question: to open a subsidiary or not? What is the difference between a subsidiary, a branch and a representative office? Does the parent organization actually receive significant benefits when opening a reporting one? Let's take a closer look at these legal issues.

The parent company is...

A parent company is a founder who owns a controlling stake in a subsidiary (50% or more). In other words, it is the main economic society.

Here are some powers of the "mother":

• Has the right to carry out certain operations and participate in the production of certain goods of a subordinate company.
• Implements organizational and economic principles of management.
• Develops specific goals, controls the direction and development of both the company and its departments.
• It is responsible for the distribution of profits.
• This company controls not only its financial planes, but also their use in departments.
• Decides to liquidate or reorganize a subsidiary.

In order to improve the efficiency of the subsidiary, the founder may conduct. This analysis reveals the strengths and weak sides business financial activities.

The subsidiary is...

A subsidiary is a branch of a large corporation with its own shares. When the established company is gaining momentum, it becomes necessary to create subsidiaries. Since investments in the subsidiary are made by the main organization, it also controls it in accordance with the concluded agreement. Most of the decisions made by the "daughter" come into force only after agreement with the parent center.

The parent company is fully responsible for the subsidiary to the regulatory authorities of the state. It is obligatory to register a “daughter” in the manner specified legislative acts. Successful interaction between "mother" and "daughter" is possible only if subordination at work.

A subsidiary is a separate legal entity. In fact, it is engaged in independent economic activity. Human Resources and marketing strategy in this enterprise, the leader takes over. The set of rules that establishes the order of work constitutes the mother center. But, according to the Charter, the daughter is responsible for the decisions made. Well, capital management is the responsibility of the main organization.

Pros and cons of a subsidiary

TO strengths"daughters" include the following features:

• A subsidiary cannot be declared bankrupt because the entire responsibility for financial management lies with the parent.
• The marketing strategy for subsidiaries is developed by its founder. This means that he is the guarantor of product quality. The situation makes it possible to use the reputation of the main company, which has been accumulated over a long period of time, its symbols, etc.
• There is no need for a subsidiary to worry about calculations and budgeting, because the parent company does the bookkeeping.
• The parent organization is fully responsible for the expenses of the subsidiary and pays its debts.

The main disadvantages in organizational and legal relations that characterize a subsidiary:

• Deprivation of the possibility of self-development and the introduction of rational proposals for more extensive activities, and as a result - dependence on the parent company. For example, when considering , a subcompany should take into account the opinion of the main one.
• Restriction in the use and distribution of fixed capital, as this is done by the management of the main company according to a clearly defined plan.
• Influence during the bankruptcy of the “mother” or branches dependent on her on the “daughter”, up to the stop of the latter’s activities with the withdrawal of its funds to pay off debts.

Features of opening a subsidiary

Why are such companies formed and what is required to open them? Here are the main goals:

1. "Subsidiaries" are often created for use by large corporations in the event of various problems in the course of their activities. This is an opportunity to start a business from scratch, without taking into account past debts. An additionally created organization can become useful in improving the administration system and getting rid of routine work.
2. A subsidiary company helps to solve issues with the selection of personnel and participate in the fight against competitors. The holding gains an advantage in the market with the opening of more subsidiaries.
3. The “daughters” are very helpful in the development foreign economic activity. The conclusion of transactions with foreign counterparties will play into the hands (savings are achieved due to tax incentives). In many ways, the prosperity of a business depends on the ability to properly organize. New contacts and connections (including abroad) - additional opportunities and results.
4. The creation of a subsidiary increases the stability of the parent company. This, in turn, gives an excellent chance to increase financial flows and investments, to use assets and resources rationally.
5. Sometimes a strategy is used in parallel with the opening of a subsidiary. This is an opportunity to engage in a new activity and reduce risks.

To achieve the above goals, the following tasks are set for subsidiaries:

• Improving the quality and, as a result, the competitiveness of manufactured goods or services.
• Involvement of specialists in management bodies.
• Minimization of cooperative ties with the parent organization.

When opening a subsidiary, you will need:

1. Documents of the ruling and the Charter of the subsidiary organizations.
2. A legally certified decision on the application form P11001 to form a subsidiary.

Important: documentary evidence of what is missing indicates the solvency of the founder.

Responsibility of the parent organization

At the legislative level, three cases of liability were previously provided for:

1. When the relationship between the parent and subsidiary companies was proved.
2. If the parent organization has obliged the subsidiary to take part in the conclusion of the transaction. This instruction had to be documented. In this case, both entities are subsidiarily liable to the general obligations, which means that in the event of adverse consequences, the debt to creditors must be repaid by any of the firms.
3. If, as a result of the order of the parent company, the subsidiary suffered losses and turned out to be bankrupt. In this case, vicarious liability also applies. The parent company must repay part of the debt of the subsidiary.

Thanks to innovations in the Civil Code of the Russian Federation, the rule for holding the parent company liable for the debt obligations of a subsidiary has been simplified. That is, it is not necessary to prove the right of the parent company to instruct the subsidiary in the Charter of the latter or in the agreement between these two organizations.

What is the difference between a subsidiary and a branch office?

Branch- this is a subdivision of a legal entity that is located outside its territory and performs most of its appointments, including the function of representation. It is entered in the unified state register, and in its activities uses the property of the parent company and operates on the basis of its provisions. The legal entity appoints the heads of branches, who perform their duties in accordance with the provided power of attorney.

Representation is a separate subdivision of a legal entity that does not have a legal status. Its function is to represent the interests of society and to protect them. The principle of operation is in many ways similar to that of a branch: all actions are performed with the consent of the legal entity, this also applies to the appointment of managers.

Distinctive features of subsidiaries:

1. The parent company exercises relative control over the subsidiary, provides it with legal autonomy and thus influences decision-making. In contrast, a dependent society generally does not have the right to make any decisions without discussion with the parent organization.
2. "Daughter" has the status of a legal entity, which is not typical for branches and representative offices. This means that such a company can be located on the territory of the main one, which is excluded for branches.
3. A subsidiary company can be in any organizational and legal form.

Thus, subsidiaries are more independent structural units, since they have more rights and powers, and also own property on the basis of ownership. Branches and representative offices have more limited opportunities for economic management.

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In general, opening a subsidiary has a number of advantages, but, on the other hand, imposes legal liability. With a properly drawn up business plan, a “daughter” can significantly increase the company's income and reduce risks. Such an expansion of activity is quite an interesting phenomenon that deserves close attention.

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When a company buys another company, the second company usually becomes a subsidiary. For example, Amazon owns many subsidiaries, including everything from Audible (recorded books) to Zappo (online shoe sales).

What is a subsidiary

A subsidiary is a company owned and controlled by another company. The own company is called the parent company or sometimes the holding company.

The parent company of a subsidiary may be the sole owner or one of several owners.

If a parent company or holding company owns 100% of another company, that company is referred to as a "wholly owned subsidiary".

There is a difference between a parent company and a holding company in terms of operations. The holding company does not have its own operations; he owns a controlling interest and owns the assets of other companies (subsidiaries).

A parent company is simply a company that operates a business and owns another business - a subsidiary. The parent company has its own operations, and the subsidiary company may carry on the related business. For example, a subsidiary may own and manage the parent company's property assets and hold liability separately from those assets.

A corporation or S corporation is owned by shareholders. In this case, the parent company usually owns 50% or more of the shares of the subsidiary.

An LLC is owned by members whose ownership interest is controlled by an operating agreement.

An LLC may own another LLC.

Why form a subsidiary

Subsidiaries are common in some industries, especially real estate. A company that owns real estate and has multiple properties may form a common holding company, with each property being a subsidiary. The rationale for this is to protect the assets of different entities from each other's liabilities.

For example, if company A owns companies B, C and D (each property) and company D is sued, the other companies are not affected.

How a subsidiary is formed

A subsidiary is formed by registration in the state in which the company operates. Ownership of a subsidiary is indicated during registration.

Suppose company A wants to create a subsidiary to manage its properties. The subsidiary, Company B, registers with the State and indicates that it is wholly owned by Company A.

How the subsidiary operates

The subsidiary operates as a regular company, while the parent company has only supervision. If the parent company exercised day-to-day supervision of the subsidiary, this would mean that the parent took over the responsibility of the subsidiary.

Accounting and taxes for subsidiaries

From point of view accounting the subsidiary is a separate company, so it will keep its own financial statements, bank accounts, assets and liabilities. Any transactions between the parent company and the subsidiary must be registered.

Many companies present consolidated financial statements (balance sheet and income statement) to shareholders, showing that the parent company and all subsidiaries are combined.

From a tax point of view, a subsidiary is a separate tax entity.

Each subsidiary has its own tax identification number and pays all of its taxes according to the type of business it has.

If a parent company owns 80% or more of the shares and voting rights for a subsidiary, it may file a consolidated tax return to take advantage of offsetting the profits of one subsidiary against losses from another. The subsidiary must agree to be included on this consolidated tax return.

Subsidiary Disadvantages

LegalZoom notes that if the parent company is sued, it may move to subsidiaries. “If the parent LLC has a claim or a court order on it, the assets of the subsidiaries may be at risk. Any action against the parent can legally go after the assets of the parent company, which in this case are the LLC itself.”

If company B is a subsidiary of company A and company B receives a claim, company A is still liable.

If it is a completely separate company, the liability remains separate.

One of the disadvantages of subsidiaries is that they are more complex from a tax, legal and accounting point of view. You will need both tax and accounting professionals to help you set up a branch and move on to the rules.

Subsidiary vs. Partnership and Associate

A subsidiary is a company that is at least partly owned by a parent company. In the case of an associate, the parent company owns a lesser controlling interest.

The term "partner" can be misleading. In the context of company ownership, a subsidiary is similar to an associate in which the parent company owns less than 50%.

But in the world of e-commerce, partnerships are contractual relationships between two separate companies to sell products or services. In this case, neither company has ownership or responsibility for the activities of another company.

What is the difference between a subsidiary and a DBA (Doing Business As)

A subsidiary is a legal entity registered in the State. "Doing Business As" or DBA trade name status is not a legal entity; it is the name used by the business when trading with the public. For example, Company XYZ might do business as Jim's Auto Repair.

Denial of responsibility: Accounting and taxes for subsidiaries are complex and every situation is different. This is a very brief general summary of accounting, legal and taxation for ancillary situations. Get an attorney, CPA and tax professional to help you set up and run a subsidiary.