Subsidiaries-What Are They And Why Use Them?

What is a Subsidiary?

A subsidiary is a corporation within a chain that starts from the parent company, where each corporation (except the last) holds 50% or more of the voting power in the next. This structure allows the parent company to maintain control and promote:

• Strategic alignment

• Resource allocation

• Operational efficiency

Here are 10 reasons why you should consider forming a subsidiary for your company:

1. Unlock Global Talent Pools: Access specialized talent worldwide and potentially lower hiring costs by establishing a subsidiary.

2. Seamlessly Enter New Markets: Subsidiaries facilitate trust with local partners and allow tailored offerings to meet regional demands.

3. Optimize Offshore Opportunities: Offshore subsidiaries can provide access to international partnerships and benefits like lower taxes and asset protection.

4. Limit Liability Exposure: Subsidiaries protect the parent company from legal and financial issues faced by the subsidiary.

5. Safeguard Intellectual Property: Centralizing IP within a subsidiary enhances control, reduces licensing costs, and shields valuable assets from lawsuits.

6. Maximize Tax Efficiency: Subsidiaries can optimize tax planning by establishing operations in low-tax regions and consolidating tax reports.

7. Diversify Business Risk: Subsidiaries allow exploration of new markets without jeopardizing the parent company's financial health.

8. Boost Investor Confidence: Local subsidiaries demonstrate commitment and enhance credibility, attracting regional funding.

9. Navigate Permanent Establishment Rules: Forming a subsidiary helps manage operations and tax exposure once business activities trigger local tax obligations.

10. Enable Strategic Flexibility: Subsidiaries allow support for joint ventures and localized operations while enabling independent restructuring or dissolution.

Our office can effectively address any legal questions about subsidiaries. If you have any questions, please fill out the following form below and a Business Lawyer from our office will get back to you.