What Is A Wholly-Owned Subsidiary?

Marcelle van Niekerk

Content Manager

Last Updated

February 14, 2025

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what Wholly-Owned Subsidiary

As a business owner or human resources manager, you may come across the term 'wholly-owned subsidiary' in the context of corporate structure and management. A wholly-owned subsidiary is a company whose entire stock is owned by a parent company, granting the parent full control over its operations and policies. This structure allows the parent company to diversify its business interests, enter new markets, and manage risks by operating distinct legal entities.

For example, The Walt Disney Company owns 100% of Marvel Entertainment, making Marvel a wholly-owned subsidiary. This ownership enables Disney to expand its entertainment offerings while allowing Marvel to operate independently in its specialized market.

How Does a Wholly-Owned Subsidiary Work?

A wholly-owned subsidiary functions as an independent legal entity, distinct from its parent company. However, since the parent company holds full ownership, it has the authority to guide the subsidiary’s operations, decision-making, and overall direction.

The subsidiary can operate in various industries, participate in its own supply chain, or contribute to the parent company’s broader objectives, all while abiding by local laws and regulations.

For example, large corporations like the Walt Disney Company own multiple wholly-owned subsidiaries that operate independently yet align with Disney’s corporate objectives.

Do Wholly-Owned Subsidiaries Maintain Their Own Accounting Records?

Yes, wholly-owned subsidiaries typically maintain their own accounting records. Although they are fully owned by the parent company, wholly-owned subsidiaries operate as separate legal entities, meaning they are required to keep their own financial statements, track revenue, and expenses, and handle tax obligations according to local laws.

However, the parent company may consolidate the financial statements of the subsidiary into its own for reporting purposes, particularly for tax filings or annual reports. This allows the parent company to present a unified financial position across all subsidiaries while still maintaining the distinct financial operations of each subsidiary.

This separation helps the parent company manage risk, maintain compliance with local regulations, and accurately track the performance of each subsidiary.

What Are Examples Of Wholly-Owned Subsidiaries?

Some well-known examples of wholly-owned subsidiaries include:

Walt Disney Animation Studios: A subsidiary wholly owned by The Walt Disney Company.
Google LLC: A wholly owned subsidiary of Alphabet Inc.
YouTube: Operates as a wholly-owned subsidiary under the parent company Google.
Volkswagen Group of America: Is a wholly-owned subsidiary under Volkswagen AG.

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Wholly-Owned Subsidiary Pros and Cons

Wholly-Owned Subsidiary Pros	Wholly-Owned Subsidiary Cons
The parent company has complete oversight of its operations, strategies, and financials.	Operations can be expensive, especially when maintaining compliance with local regulations.
Depending on local tax laws, it may offer significant tax advantages. For example, some U.S. states offer tax incentives for companies operating wholly-owned subsidiaries within their jurisdictions.	Each wholly-owned subsidiary must adhere to the laws and regulations of its respective country, which adds administrative complexity.
It operates as a separate entity, reducing the parent company’s exposure to risk.	Managing separate legal entities while maintaining parent company control can create operational inefficiencies as the company’s management may be spread too thin.
It allows parent companies to enter new markets and comply with local laws without creating a new entity from scratch.	Some local stakeholders may prefer dealing with homegrown companies rather than foreign-owned subsidiaries.
Enhances the parent company’s bottom line by driving profits across separate legal entities while maintaining centralized control.

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What Is The Difference Between A Wholly-Owned Subsidiary And A Partially-Owned Subsidiary?

The primary difference between a wholly-owned subsidiary and a partially-owned subsidiary lies in the percentage of ownership and control the parent company holds.

Aspect	Wholly-Owned Subsidiary	Partially-Owned Subsidiary
Ownership	100% of shares owned by the parent company.	The majority of shares are owned by the parent company, but less than 100%.
Control	Full control is held by the parent company.	Significant control is held by the parent company, but minority shareholders may have some rights.
Shareholders	No external shareholders.	Includes minority shareholders.
Decision-making	Is entirely directed by the parent company.	Requires input from minority shareholders for specific decisions.
Legal Entity Status	Is a separate legal entity from the parent company.	Separate legal entity from the parent company.
Profit and Loss	The parent company fully absorbs all profits and losses.	The parent company shares profits and losses with minority shareholders.

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Wholly-owned subsidiaries allow you to expand your business globally by establishing foreign entities. Similarly, global EORs like Playroll enable you to scale your business globally without the hassle associated with starting legal entities abroad. Whether you're looking to expand your company’s footprint or streamline your existing operations, Playroll can help scale your team without the red tape. Book a chat with one of our experts to find out how we can grow your business.

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Wholly-Owned Subsidiary FAQs

What Is The Difference Between A Wholly-Owned Subsidiary And A Joint Venture?

The main difference comes down to ownership and control: wholly-owned subsidiaries provide full control to the parent company, while joint ventures involve shared ownership and decision-making with other entities.

How Is A Wholly-Owned Subsidiary Created?

A parent company can create a wholly owned subsidiary by either incorporating a new company or acquiring an existing one, purchasing 100% of its shares.

Are There Limitations To International Subsidiaries?

Yes, there are several limitations and challenges associated with operating international subsidiaries such as supply chain and logistics issues and socio-economic fluctuations. These limitations often stem from differences in legal, financial, and operational frameworks across countries.

Related terms

Equity Joint Venture

Partially Owned Subsidiary

Equity

ABOUT THE AUTHOR

Marcelle van Niekerk

Marcelle is a skilled Content Manager at Playroll, a leading global HR platform. With a passion for storytelling and a keen eye for trends, Marcelle specializes in crafting insightful content about remote work, global employment, and the evolving dynamics of the modern workforce.