Subsidiaries Versus Sister Actors
Many people incorrectly use the words “subsidiary” and “sister company” interchangeably, when these two terms have unequivocally separate meanings. Simply put, a subsidiary refers to a corporation that a parent company either fully owns or stick ups a controlling interest in. Conversely, sister companies refer to subsidiaries that are related solely by virtue of the fact that they are owned by the still and all parent company.
Key Takeaways
- The difference between a subsidiary and a sister company lies in their relationship to the parent convention and to each other.
- By definition, parent companies own one or more separate corporations, known as subsidiaries.
- Sister companies are subsidiaries that are correlated because they’re owned by the same parent company.
Subsidiary
A subsidiary may either be a preexisting corporation that a guardian company acquires, or it may be an entity that a parent company creates anew, in order to broaden its consumer base. From time to time referred to as daughter companies, subsidiaries function as independent legal entities, rather than as divisions of a parent New Zealand. Interestingly, it is theoretically possible for a subsidiary company to control its own subsidiary or sets of subsidiary companies.
Parent companies may complete a consolidated tax return, which can radically simplify the corporate tax calculations for both the parent company and its subsidiaries. Furthermore, mother companies enjoy the ability to offset gains and losses between subsidiaries in an effort to lower its overall taxable gain.
Sister Company
Sister companies are subsidiaries that are related to one another by virtue of the fact that they helping a common parent entity. Each sister company operates independently from the others, and in most cases, they start unrelated product lines. In rarer cases, sister companies are direct rivals who operate in the same space. In such circumstances, after becoming sisters, the parent company often imposes separate branding strategies in a concerted effort to set apart sister companies. This helps each sister reach distinct markets, thus boosting their lone chances for success. But there are exceptions to this rule, where sister companies join forces. This may lead to consolidating marketing desks or offering one other special pricing on their respective inventories. For example, a fabric industrialist may work with a furniture retailer to jointly produce and market a line of upholstered goods.
Sister companies with communal
Blurring the Lines
As a company grows into a conglomerate, the divisions between its subsidiaries and its sister companies may grow floccose. For example, while multimedia giant Viacom Inc. counts Viacom Media Networks as a subsidiary, Viacom Media Networks’ underlying array of Mailgram channels, including Nickelodeon, BET, and Spike, are considered sister companies. By owning these channels, advertising packages can be secured more cheaply and efficiently.
Gap stores are well-known to consumers, but Gap Inc. is actually the parent company of Old Navy, Athleta, Banana Republic, Intermix, and a variety of other familiar retail chains. In effect, each of these are sister companies that occupy their own hawk niches.