{"id":31355,"date":"2025-12-05T03:52:50","date_gmt":"2025-12-05T03:52:50","guid":{"rendered":"https:\/\/msadvisory.com\/?p=31355"},"modified":"2026-04-20T11:34:17","modified_gmt":"2026-04-20T11:34:17","slug":"subsidiary-vs-wholly-owned-subsidiary","status":"publish","type":"post","link":"https:\/\/msadvisory.com\/subsidiary-vs-wholly-owned-subsidiary\/","title":{"rendered":"Wholly-Owned Subsidiary vs Joint Venture in China"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"31355\" class=\"elementor elementor-31355\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-e849991 e-flex e-con-boxed e-con e-parent\" data-id=\"e849991\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-bba692c key-takeaways elementor-widget elementor-widget-text-editor\" data-id=\"bba692c\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h3>Key Takeaways<\/h3><ul><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">A wholly-owned subsidiary\u2019s common stock is 100% owned by a parent company.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Wholly-owned subsidiaries may be set up new or result from the takeover of existing companies.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">While subsidiaries can be publicly traded and have minority shareholders, wholly-owned subsidiaries are privately held by just one shareholder.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Wholly owning a subsidiary can limit risk by giving the parent total control.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-5614806 elementor-widget elementor-widget-text-editor\" data-id=\"5614806\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>When growing your company internationally, it is crucial to work out the right structure for your expansion. Is a wholly-owned subsidiary best, or would a smaller investment be sufficient?<\/p><p>In this article we look at the key differences between subsidiaries and wholly-owned subsidiaries.\u00a0\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a7f1268 elementor-widget elementor-widget-text-editor\" data-id=\"a7f1268\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2><span style=\"font-weight: 400\">What is a subsidiary?<\/span><\/h2><p><span style=\"font-weight: 400\">A subsidiary is a company that is owned, at least in part, by another entity. It may be set up in the same place or a different jurisdiction with different laws to comply by. When a company owns more than 50% of the subsidiary\u2019s common stock, however, the owning company is called a <strong>parent company <\/strong>(See <a href=\"https:\/\/www.sec.gov\/files\/rules\/final\/33-7355.pdf\" target=\"_blank\" rel=\"noopener\">U.S. Securities and Exchange Commission<\/a>). Any other shareholders are called minority shareholders. While they can share in the profits generated by the company via dividends, they have little to no say in how it is operated.<\/span><\/p><p><span style=\"font-weight: 400\">In some cases, subsidiaries are formed\u00a0 when parent companies look to take over established companies in order to gain control of a business activity, get a foothold in a new market, or access a proprietary technology or worker expertise. These parents typically look for companies already in their supply chains, which allows them to have greater control over some processes. Subsidiaries may be formed through voluntary mergers or simply be bought out in <a href=\"https:\/\/www.law.cornell.edu\/wex\/hostile_takeover#:~:text=A%20hostile%20takeover%20is%20a,hence%20the%20term%20%22hostile%22.\" target=\"_blank\" rel=\"noopener\">hostile takeovers<\/a>.<\/span><\/p><p><span style=\"font-weight: 400\"> Other times, however, a subsidiary is opened as a brand-new entity. This is common when a business is moving it&#8217;s existing operations into a new market.\u00a0<\/span><\/p><p><span style=\"font-weight: 400\">Regardless of ownership, <strong>a subsidiary is considered a distinct legal entity from its parent company<\/strong>. It has its own directorship, company culture, capital, and liability. It can have its own clients and customers, and in some cases, it may even compete with the parent. Therefore, a subsidiary can be sued independently of a parent company and can also hold patents and trademarks of its own as well.\u00a0<\/span><\/p><p><span style=\"font-weight: 400\"><strong>Subsidiaries can own their own subsidiaries<\/strong>, which can also have subsidiaries. These companies exist in a chain of tiered ownership with the parent company at the top level with the most ownership and control over all the others.<\/span><\/p><p><span style=\"font-weight: 400\">Subsidiaries can exist across all industries. They don\u2019t even need to be part of the same industry as their parent companies. Examples of subsidiaries include Instagram, owned by Meta Platforms Inc. and Minute Maid, owned by the Coca-Cola Company.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-6b9691b elementor-widget elementor-widget-text-editor\" data-id=\"6b9691b\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2><span style=\"font-weight: 400\">What is a wholly-owned subsidiary?<\/span><\/h2><p><span style=\"font-weight: 400\">A parent company can own any amount of the stock of a subsidiary. If it happens to own 100% of that common stock, however, then this makes the subsidiary company a wholly-owned subsidiary (See <a href=\"https:\/\/www.investopedia.com\/terms\/w\/whollyownedsubsidiary.asp\" target=\"_blank\" rel=\"noopener\">Investopedia<\/a>)<\/span><\/p><p>In China, a wholly foreign-owned subsidiary is typically established as a <a href=\"https:\/\/msadvisory.com\/service\/wfoe-in-china\/\">Wholly Foreign-Owned Enterprise (WFOE)<\/a>.<\/p><p><span style=\"font-weight: 400\">Since a wholly-owned subsidiary has only a single shareholder, the parent company, it has no minority shareholders to share profits with. Instead, all profits generated by the subsidiary are paid to the parent company as dividends. A subsidiary, as a separate business entity, performs its own accounting, keeping an eye on its own profits, losses, assets, and liabilities. The parent company does the same. At the same time, both companies need to record funds that travel between them, such as investments from the parent company or dividends from the subsidiary company. A consolidated financial statement may be used by the parent to combine all of its own financials with those of its subsidiary in one convenient place (<a href=\"https:\/\/www.ifrs.org\/issued-standards\/list-of-standards\/ifrs-10-consolidated-financial-statements\/\" target=\"_blank\" rel=\"noopener\">IFRS Foundation<\/a>).<\/span><\/p><p><span style=\"font-weight: 400\">Famous examples of wholly-owned subsidiaries include Marvel Entertainment, owned 100% by the Walt Disney Company, and Volkswagen America, a wholly-owned subsidiary of Germany\u2019s Volkswagen AG.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-1d493af elementor-widget elementor-widget-text-editor\" data-id=\"1d493af\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<table>\n  <thead>\n    <tr>\n      <th>Feature<\/th>\n      <th>Subsidiary<\/th>\n      <th>Wholly-Owned Subsidiary<\/th>\n      <th>Implications for Businesses<\/th>\n    <\/tr>\n  <\/thead>\n  <tbody>\n    <tr>\n      <td>Ownership<\/td>\n      <td>Parent owns 51\u201399%<\/td>\n      <td>Parent owns 100%<\/td>\n      <td>Higher ownership = full strategic control<\/td>\n    <\/tr>\n    <tr>\n      <td>Shareholders<\/td>\n      <td>Includes minority shareholders<\/td>\n      <td>No minority shareholders<\/td>\n      <td>No need to negotiate with external stakeholders<\/td>\n    <\/tr>\n    <tr>\n      <td>Decision-Making<\/td>\n      <td>Slower due to minority input<\/td>\n      <td>Very fast decisions<\/td>\n      <td>Ideal for markets requiring quick reactions<\/td>\n    <\/tr>\n    <tr>\n      <td>Risk Exposure<\/td>\n      <td>Risk shared with minority owners<\/td>\n      <td>Parent carries 100% of risk<\/td>\n      <td>Important in volatile or complex markets<\/td>\n    <\/tr>\n    <tr>\n      <td>Financing &amp; Costs<\/td>\n      <td>Lower capital requirements for parent<\/td>\n      <td>Full capital requirement by parent<\/td>\n      <td>Budgeting is simpler but more expensive upfront<\/td>\n    <\/tr>\n  <\/tbody>\n<\/table>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f0d6a2e elementor-widget elementor-widget-text-editor\" data-id=\"f0d6a2e\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2><span style=\"font-weight: 400\">Key differences between a subsidiary and a wholly-owned subsidiary<\/span><\/h2><p><span style=\"font-weight: 400\">While subsidiaries and wholly-owned subsidiaries have a lot in common (they are incorporated entities &#8216;owned&#8217; by a parent), there are some specific differences between them. These include:<\/span><\/p><p><b>Ownership:<\/b><span style=\"font-weight: 400\"> A wholly-owned subsidiary is completely owned by a single entity, its parent company. Other subsidiaries can have as little as 51% parent ownership and necessarily include at least one other minority shareholder.<\/span><\/p><p><b>Public\/private:<\/b><span style=\"font-weight: 400\"> By definition, a wholly-owned subsidiary is a privately held company owned exclusively by its parent. A regular subsidiary, on the other hand, can have publicly traded stock even if the majority of it is held by the parent company.<\/span><\/p><p><b>Decision-making:<\/b><span style=\"font-weight: 400\"> With only one owner, the wholly-owned subsidiary can very quickly and easily act, as only one party is making decisions. A subsidiary with minority shareholders must often take their ideas and opinions into account and this can slow the decision-making process significantly.<\/span><\/p><p><b>Taking over:<\/b><span style=\"font-weight: 400\"> When a parent company decides to invest in the takeover of an established business, buying it outright allows it to gain complete control. Having to share a subsidiary with existing shareholders can slow and even prevent change.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2f9b1c5 elementor-widget elementor-widget-text-editor\" data-id=\"2f9b1c5\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>Wholly-owned subsidiaries (WOS) provide 100% control and simplified dividends but require higher capitalization and may face approval delays in sensitive sectors. Joint ventures share profits but distribute management control and approval risk. The right structure depends on sector and capital constraints. <a href=\"https:\/\/msadvisory.com\/service\/wfoe-in-china\/\">WFOE registration<\/a> should evaluate both models against your capital and control priorities. MSA Asia recommends optimal structures. <a href=\"https:\/\/msadvisory.com\/contact\/\">Have a conversation<\/a> about structural options for your operation.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7256ec7 elementor-position-left elementor-vertical-align-middle elementor-position-top speak-expert-new elementor-widget elementor-widget-image-box\" data-id=\"7256ec7\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image-box.default\">\n\t\t\t\t\t<div class=\"elementor-image-box-wrapper\"><figure class=\"elementor-image-box-img\"><a href=\"https:\/\/msadvisory.com\/contact\/\" tabindex=\"-1\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg\" class=\"attachment-full size-full wp-image-21671\" alt=\"Shanghai China\" srcset=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg 1024w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-300x169.jpeg 300w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-768x432.jpeg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"elementor-image-box-content\"><div class=\"elementor-image-box-title\"><a href=\"https:\/\/msadvisory.com\/contact\/\">Unsure whether to establish a subsidiary or wholly-owned subsidiary?<\/a><\/div><p class=\"elementor-image-box-description\">Our incorporation experts guide you through risk, tax exposure, governance requirements, and capital needs - and help you choose the structure that fits your strategy.\n<span>Message &nbsp;\u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-cdbc597 e-flex e-con-boxed e-con e-parent\" data-id=\"cdbc597\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-ce6c822 elementor-widget elementor-widget-heading\" data-id=\"ce6c822\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">FAQ<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2311034 align-at-right uael-faq-box-layout-yes elementor-widget elementor-widget-uael-faq\" data-id=\"2311034\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"uael-faq.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\n\t\t\t<div id='uael-faq-wrapper-367' class=\"uael-faq-wrapper\">\n\t\t\t\t<div class=\"uael-faq-container uael-faq-layout-accordion\" data-layout=\"accordion\" >\n\t\t\t\t\t\t\t\t\t\t\t\t<div id=\"uael-accordion-4e204cd\" class=\"uael-faq-accordion\" role=\"tablist\">\n\t\t\t\t\t\t\t\t<div class= \"uael-accordion-title\" aria-expanded=\"false\" role=\"tab\">\n\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon uael-accordion-icon-right\">\n\t\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon-closed\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"14\" height=\"14\" viewBox=\"0 0 14 14\" fill=\"none\"><path d=\"M6 6V0H8V6H14V8H8V14H6V8H0V6H6Z\" fill=\"#2453ff\"><\/path><\/svg><\/span>\n\t\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon-opened\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"14\" height=\"2\" viewBox=\"0 0 14 2\" fill=\"none\"><path d=\"M0 0V2H14V0H0Z\" fill=\"#2453ff\"><\/path><\/svg><\/span>\n\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t<span class=\"uael-question-4e204cd uael-question-span\" tabindex=\"0\" id=\"uael-faq-1-69f1a0f63883c\">What are the legal implications of owning a wholly-owned subsidiary?<\/span>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<div class=\"uael-accordion-content\" role=\"tabpanel\">\n\t\t\t\t\t\t\t\t\t<span>\n\t\t\t\t\t\t\t\t\t<span><p>A wholly-owned subsidiary is still its own independent legal entity. It, therefore, shields the parent company from liability if the subsidiary does anything wrong. A parent company cannot be sued for wrongdoings by its subsidiary, even if it\u2019s wholly-owned. <a href=\"https:\/\/www.gov.uk\/hmrc-internal-manuals\/business-income-manual\/bim38250\" target=\"_blank\" rel=\"noopener\">In some cases<\/a>, however, it may be held financially responsible if the subsidiary goes bankrupt.<\/p><\/span>\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<div id=\"uael-accordion-71c8c6c\" class=\"uael-faq-accordion\" role=\"tablist\">\n\t\t\t\t\t\t\t\t<div class= \"uael-accordion-title\" aria-expanded=\"false\" role=\"tab\">\n\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon uael-accordion-icon-right\">\n\t\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon-closed\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"14\" height=\"14\" viewBox=\"0 0 14 14\" fill=\"none\"><path d=\"M6 6V0H8V6H14V8H8V14H6V8H0V6H6Z\" fill=\"#2453ff\"><\/path><\/svg><\/span>\n\t\t\t\t\t\t\t\t\t\t<span class=\"uael-accordion-icon-opened\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"14\" height=\"2\" viewBox=\"0 0 14 2\" fill=\"none\"><path d=\"M0 0V2H14V0H0Z\" fill=\"#2453ff\"><\/path><\/svg><\/span>\n\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t<span class=\"uael-question-71c8c6c uael-question-span\" tabindex=\"0\" id=\"uael-faq-2-69f1a0f638b52\">How does the risk profile differ between a subsidiary and a wholly-owned subsidiary?<\/span>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<div class=\"uael-accordion-content\" role=\"tabpanel\">\n\t\t\t\t\t\t\t\t\t<span>\n\t\t\t\t\t\t\t\t\t<span><p>In general, owning a subsidiary completely provides parent companies with a lower amount of risk because of increased control. With majority-owned subsidiaries, the parent company may be the controlling shareholder, but other shareholders could have influence. This can make decision-making more difficult compared with a wholly-owned subsidiary that can be directed entirely by the parent company. At the same time, the parent takes a large financial risk by acquiring their wholly-owned subsidiary in its entirety.\u00a0<\/p><\/span>\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Key Takeaways A wholly-owned subsidiary\u2019s common stock is 100% owned by a parent company. Wholly-owned subsidiaries may be set up new or result from the takeover of existing companies. While subsidiaries can be publicly traded and have minority shareholders, wholly-owned subsidiaries are privately held by just one shareholder. Wholly owning a subsidiary can limit risk [&hellip;]<\/p>\n","protected":false},"author":20,"featured_media":31356,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"iawp_total_views":1540,"footnotes":""},"categories":[6],"tags":[],"class_list":["post-31355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-entities"],"acf":[],"_links":{"self":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/31355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/comments?post=31355"}],"version-history":[{"count":15,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/31355\/revisions"}],"predecessor-version":[{"id":47189,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/31355\/revisions\/47189"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media\/31356"}],"wp:attachment":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media?parent=31355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/categories?post=31355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/tags?post=31355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}