What is a Subsidiary?
The short answer
A subsidiary is an entity controlled by another entity under the applicable corporate or accounting definition.
Subsidiary: why it matters
The relationship between a legal entity, its owners and its group can affect how a business is understood. Record the relevant parties and relationship type without merging distinct entities.
How to assess it in practice
Retain a separate legal-entity record even when it belongs to a larger group. Start by defining the question the team needs to answer. Identify the relevant record or evidence, check its scope and date, and retain the reasoning behind the result. If evidence conflicts, keep that conflict visible for review.
Worked example
Illustrative workflow: a team reviewing a business adds a separate check for subsidiary. The reviewer’s task is to retain a separate legal-entity record even when it belongs to a larger group. The outcome is recorded together with the supporting evidence; an unresolved question stays open rather than being converted into a positive result.
A contract is with a local subsidiary while the report concerns its profitable parent. Assess the contracting entity and any documented support arrangements separately.
Distinctions that matter
Subsidiary belongs to the corporate group relationships topic family. Read Corporate Linkage alongside it to understand the adjacent question. Each page has its own intended scope; shared context does not make the concepts equivalent.
Evidence and review output
Review these
- Entity identifiers at both ends
- Relationship type and source
- Effective dates and group boundary
The review should produce
A dated set of supported entity relationships, distinct from branding or other inferred associations.
Across this family
Define what makes an entity part of the group before drawing relationships. Legal control, accounting consolidation and commercial affiliation are not identical. Store relationship types and dates so a user can understand why two entities are connected without assuming they share every obligation.
A note from practice
A subsidiary is a distinct entity within a control relationship. Its obligations and financial evidence should not automatically be replaced with those of the parent without an appropriate basis.
Limits and common mistakes
The practical boundary is important: Retain a separate legal-entity record even when it belongs to a larger group. Do not substitute a related label for this check or assume that missing information is a negative finding. Source-specific and jurisdiction-specific rules require their own review.
Frequently asked questions
Which evidence should I review?
How is Subsidiary different from Ultimate Parent Company?
What should the result of the review contain?
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Related topics
- Corporate group relationshipsCorporate LinkageCorporate linkage describes the relationships between legal entities, such as parent companies, subsidiaries and other members of a corporate group. It turns individual company records into a view of how businesses are connected. Each relationship should identify its type and the evidence supporting it.
- Corporate group relationshipsParent CompanyA parent company has an ownership or control relationship with another company under the relevant definition.
- Corporate group relationshipsUltimate Parent CompanyAn ultimate parent company is the highest parent identified in a defined group hierarchy and evidence scope.
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