In business parlance world-wide, the subsidiary-parent company structure is increasingly getting very popular. The reason being, it limits the liability and legal exposure one company has if another one fails. In addition, many multinationals create subsidiaries for tax advantages.
These subsidiaries, in which the parent company owns more than 50 percent of the voting stock, have their own corporate bank accounts and operating capital. The subsidiaries can also own assets.
Main reasons why a parent company forms a subsidiary company are:
- * Enjoy tax benefits prevailing in the region where the subsidiary is incorporated.
- * Cushion against liabilities as subsidiary is a distinct legal entity.
- * Raise capital as incorporating a subsidiary allows the parent company to offer stocks in a portion of its share in the subsidiary; all this while the parent company’s stocks are not affected.
- * As not all business operations are suitable for public investment and disclosure requirements, the parent company can choose which activities to make public and which to retain private by means of a subsidiary.
- * Sometimes, incorporating a subsidiary is beneficial if its business activities are different from the parent company. This helps in keeping the brand identities separate for both the entities.
Read more about setting up a Singapore Subsidiary Company at Singapore Company Incorporation.
