What is the difference between subsidiary and affiliate

Although these words appear in the news, magazines, and investment statements, most of us may not really be sure how to differentiate between them when it comes to a legal obligation to pay. To what extent any insurance carrier is able to rope in another legal entity under a policy or whether that coverage needs to be placed separately depends on several factors.

However, the most important is to understand to what extent one entity is related to another. The parent company establishes ownership by either creating the entity or purchasing the majority of voting shares of stock.

A parent company can change its ownership status by purchasing more shares, or by selling some or ultimately all of its shares. A subsidiary can also have controlling interests in its own set of subsidiaries. Each of the sister companies can operate separately and may have no connection other than sharing the same parent company. Sister companies can be quite different from each other, producing different products and selling to completely different markets.

For example, as Berkshire Hathaway is the parent of many subsidiary companies, these subsidiaries are then sister companies to one another. There are countries where certain multinational corporations do not operate well because they are perceived as purveyors of capitalism and foreign investment.

In such scenarios, multinational companies create subsidiaries or affiliates in order to secretly penetrate a target market. This strategy is termed as foreign direct investment. Cite APA 7 Franscisco,. Difference Between an Affiliate and a Subsidiary. Difference Between Similar Terms and Objects. MLA 8 Franscisco,. A useful indeed information! Thank you! As an interpreter and when translating articles on business matters I do see these terms being interchanged sometimes and dictionaries do not always give a clear explanation.

But now I have got a perfect resource at hand with clear and, at the same time, in no way complicated explanation. I encounter this often in the type of work I am in. I am more enlightened of the difference.

A very useful website. I myself I am too an interpreter and translator on business matters…. Unfortunately it is not always as clear as you make it seem. For a corporation, ownership of the voting stock is the controlling criterion.

When companies own a percentage of other companies' stock, these other companies are considered either affiliates or subsidiaries. According to Business Dictionary. The term parent company only refers to subsidiaries and not to affiliates. This is only required with subsidiaries, not with affiliates. A subsidiary company is a company whose stock is owned 50 percent or more by another company.

This gives the parent company majority control over the subsidiary, giving it the power to make decisions, such as naming a board of directors. A subsidiary is always an affiliate; however an affiliate is not always a subsidiary.