Modern world constantly requires the development and scaling of your business. Therefore, it is not surprising that your LLC may need to create a subsidiary. Why this is necessary and how to arrange everything correctly, we will tell you further.
A subsidiary is an organization that is legally independent. It can control the production of products, delivery of goods to consumers, the introduction of new technologies, etc. But at the same time, the obligation to give the entire profit to the parent organization remains. The latter pays workers, purchases equipment and equipment, and takes on other expenses. Thus, the subsidiary is completely dependent on the budget of the main company. It turns out that the “daughter” is free in everything except financial side. Although today there are often cases when the main company actively interferes in the organization of the secondary one: appoints and removes from posts managers, and from among own personnel, directs and regulates sales routes and monitors production.
Subsidiary completely depends on the budget of the main company.
Since 1994, a subsidiary has become nothing more than a business entity created or absorbed by another company. It is vested with the right to personally manage production, but at the same time remains financially dependent. This state of affairs allows one to avoid conflicts between the parent company and its subordinate company. After all, both companies exist at the expense of each other. If it so happens that a subsidiary turns out to be insolvent, then the parent organization assumes all responsibility for this issue.
Creation of a subsidiary company
To open a subordinate enterprise that will work for the benefit of the main one at the expense of the latter, you do not need to make any extra efforts. All you need is:
- documents of the main enterprise;
- the company being created;
- the intention to create a subsidiary company, formalized in accordance with all the rules of the jurisdiction, with limited liability.
An application must be submitted on Form P11001. And here is the new order of sheet design. An important role is also played by the presence of a certificate of absence of debt from your main company.
How to create a “daughter”?
There are 2 main ways to create a subsidiary LLC. Let's look at each in order.
First way
It is necessary to draw up a special normative act - the charter of the proposed association, where all the conditions to be met should be noted. If the underlying enterprise is in the hands of several shareholders, it is useful to document each of them. The legal confirmation of the creation of a subsidiary must be a protocol. Don't forget to include your contact information. Remember that only the head of the main company has the right to sign such a document. As noted above, it is important to pay off all existing debts at the time of opening a subsidiary. If the latter encounters difficulties due to insufficient funding, it will be obliged to incur losses in favor of the head office.
The legal confirmation of the creation of a subsidiary must be a protocol.
When all the above documents are completed, a chief accountant is appointed, all papers will need to be taken to tax office for registration. After this, you can assume that your subsidiary is ready to operate.
Second way
It is considered in the case when one enterprise is part of another on the basis of a mutually beneficial agreement or due to its non-competitiveness. Popularly, this method is called the takeover of a weak company. Before taking this or that company under its wing, the future parent organization provokes the ruin of this enterprise, and only then appropriates it for a small amount. A striking example The interaction of automobile concerns can serve as such a takeover. In particular, the largest companies, such as Volkswagen, Toyota, General Motors, have concentrated in their hands most of the well-known car brands.
Creation conditions
No matter how the enterprise becomes part of another, the following conditions must be met:
- It is important to decide on the direction of the subsidiary community at the very beginning.
- Do not forget that production can differ significantly, because, although the subsidiary is controlled by the parent, it is still an independent entity. Therefore, a charter intended for a subordinate company would not hurt.
- A company that is a subordinate company must have its own bank number, address and individual. Appoint a director, an accountant and agree on profits with them.
You will have to contact the State Chamber and provide the following documents:
- Statement.
- Bank certificate about your account.
- The charter you signed.
- Characteristics of the subsidiary's employees.
- Address of the subordinate company.
- Written information about the founder.
- Certified copies of the act of acceptance and transfer of the fund and payments.
Advantages and disadvantages
The work of any subsidiary has both disadvantages and advantages. For example, the advantages include the fact that companies of this type do not need to worry about their own viability. In case of bankruptcy, all costs are borne by the flagship company. As well as the costs of maintaining a dependent institution. And the head office will also take care of competitors.
In the event of bankruptcy of a subsidiary, all costs are borne by the flagship company.
The disadvantages include restriction of freedom. It is quite difficult to develop when the company is completely under the control of another association. In addition, there is a risk of closure, because if bankruptcy threatens the parent company, then it will become expensive for the latter to maintain the subsidiary. In this case, you will need to urgently look for either sponsors or new patrons.
Management of a subsidiary LLC
After creation, it is important to turn special attention on methods of managing a subsidiary LLC and choose the most suitable one. In particular, the following options can be distinguished: sole ownership, board of directors, management company, representatives and board. We suggest studying each separately.
Management through a single executive body, which is played by general manager company is the most common method. The method is an independent solution to the problems and problems of the association, the disposal of the company’s property, the value of which does not exceed 25% of the enterprise’s assets, and the appointment of workers. This is discussed in more detail in Federal Law No. 208 of December 26, 1995 (Article 6 and Clause 1 of Article 78). IN such a case For the normal and mutually beneficial work of the “daughter” and “mother”, it is necessary to acquire regulation of the rights and obligations of both parties. And in the event of a change of manager, etc. it is necessary to take into account the opinion of all shareholders or convene a board of directors.
In the event of a change of director, the opinion of all shareholders must be taken into account or the board of directors must be convened.
The latter is also one of the ways to manage a subsidiary. That is, top management or owners of the parent company participate in the work of the board of directors of the subordinate organization. This scheme is most preferable for small holdings.
The third option is management with the help of a company. It may be either a parent organization or one specially created for these purposes. This method allows you to centralize control and allocate resources more efficiently, but is limited in the number of objects that the management company can deal with.
And finally, the last methods of management are representatives and the board. In the first case, the parent company introduces its representatives to the board of directors and itself determines the range of issues it controls. The second option provides for the inclusion of representatives of subsidiaries into the management team of the head office.
Subsidiary or branch
Often these concepts are confused with each other. But they are not synonymous. You need to figure out what the difference is and not make similar mistakes.
So, a subsidiary is legal entity, all decisions of which must be agreed with the parent in the form of an agreement. It can only be located in the territory where the main association is registered, and can engage in activities that are fundamentally different from those carried out by the parent enterprise. In turn, it duplicates the flagship’s occupation, is not considered a legal entity and can be geographically located absolutely anywhere. Moreover, this department concludes all transactions on behalf of the main company.
In conclusion, I would like to note that so common in lately The creation of a subsidiary is fully justified. If everything works out as it should, this allows small companies to stay afloat, and large ones to expand even more, acquiring new consumers and increasing their capital.
Quick navigation through the material
What is a subsidiary - according to the norms legal law This term should be understood as a legal entity that is created by a certain parent enterprise, endowing it with a number of functions and powers and the right to use property owned by the main organization. In this case, the charter, according to which the subsidiary will operate, is drawn up directly in the parent organization, which also determines the composition of the management of the newly formed branch.
A subsidiary - how does it differ from a branch or from another legal form of an enterprise. Consulting a lawyer will help you understand the nuances of management and creation, explain how a branch differs from a subsidiary, what the principles of taxation are in a particular case, and provide answers to other questions that arise in this area of corporate law. In our company, legal services on tax law are provided online at any convenient time.
Basic Concepts
A subsidiary is a legal entity organized for the purpose of expanding the economic activities of the parent company, achieved by increasing production capacity and expansion of the product market.
According to Article 105 of the Civil Code of the Russian Federation, a subsidiary is a legal entity that represents a certain business society, which is created by another company, which is the owner of the main part of the capital of this company. As a consequence of this, the main company has full rights to exercise direction and control over the decisions that will be made by subsidiaries and affiliates.
Quite often the concepts of subsidiary and branch are confused with each other, the difference between which is obvious, but for an ignorant person it is quite difficult to separate them. Consulting a lawyer will help you find out the main differences and features of both forms.
To understand the difference between a branch and a subsidiary, it is important to know the full powers of both in matters of management and responsibility.
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What is the difference between a branch and a subsidiary?
What is a Subsidiary - a legal entity that is a fairly independent entity of economic activity. The manager heading the subsidiary can independently make decisions regarding the department's management, personnel issues and marketing activities. In addition, the subsidiary has its own charter, although it is developed in the parent organization. The management structure of the subsidiary company is responsible full responsibility for your actions.
As for the branch, this form of organization assumes the latter’s complete dependence on the main company. It is in the parent organization that the department is managed. Personnel issues, production components, marketing policies, etc. are also resolved there. In addition, the branch does not have its own charter, but is subordinate to the main one.
There is a significant difference in the definitions of a subsidiary and a branch. However, a common point is the participation of the parent company in the fixed capital of the branch and in the management of it.
Many people are concerned about the question of whether it is possible to organize a subsidiary or branch of an organization in another state. An international law lawyer from our company can answer this question absolutely free of charge.
What is a subsidiary of legal services in Moscow and other cities of the Russian Federation
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Subsidiary: pros and cons
What is a subsidiary - the pros and cons of which will be explained in detail by consulting a lawyer - is the most common type of business expansion. This option is convenient for the parent company, as it allows it to expand its sphere of influence in the market, and is much simpler than creating a new enterprise.
The advantages include the following factors:
- bankruptcy proceedings cannot be initiated in relation to a subsidiary, since responsibility for debt obligations to creditors lies with the parent company;
- the marketing strategy, which is carried out by subsidiaries and affiliates, is developed in the parent organization, which acts as a guarantor of product quality, provides the opportunity to use the company’s reputation, etc.;
- the subsidiary does not have to worry about calculations and budgeting; this responsibility lies with the accounting department of the parent company;
- The subsidiary repays its expenses at the expense of the parent organization.
However, such organizational and legal relations also have their drawbacks. Among the main disadvantages characterizing the subsidiary, the following factors can be identified:
- dependence of the department on the parent company in matters of the technological nature of production and the range of manufactured products, which deprives it of the opportunity for independent growth, introduction of rational proposals or expansion of the scope of activity;
- the presence of restrictions on the use of fixed capital, since its distribution occurs according to a clearly defined plan established by the management of the main enterprise;
- if the main company goes bankrupt, the subsidiary will cease its activities, which is also possible if other dependent branches go bankrupt, since all profits will be redistributed to pay off the expenses of other subsidiaries.
Required documents
A subsidiary is a legal entity, so its creation is accompanied by the submission of a set of documents to the registration authority. The tax service at the location of the branch acts as the registrar.
Consulting a lawyer will not be an unnecessary step when preparing documents. A specialist will help you avoid major mistakes and speed up the process.
In order to open a subsidiary, you will need the following documents:
- registration and statutory documents of the parent company;
- statutory documents of the created subsidiary;
- a decision of the management of the main organization to create a dependent branch, formalized in accordance with the requirements of the law;
- a statement written in accordance with the established form (P11001);
- a certificate from the authorities exercising state tax control confirming that the parent company has no debts.
What is a subsidiary - questions regarding the preparation of documents or the registration process can be eliminated by preliminary consultation with a lawyer. This can be done on our portal for free, and at any convenient time.
Attention! Due to latest changes in legislation, the legal information in this article may be out of date! Our lawyer can advise you free of charge
Subsidiary
SUBSIDIARY COMPANY
Finance. Dictionary. 2nd ed. - M.: "INFRA-M", Publishing House "Ves Mir". Brian Butler, Brian Johnson, Graham Sidwell and others. General editor: Ph.D. Osadchaya I.M.. 2000 .
Subsidiary
A foreign branch of a company, which, according to the laws of the country where the branch is located, is an independent legal entity.
Terminological dictionary of banking and financial terms. 2011 .
See what a “Subsidiary Company” is in other dictionaries:
subsidiary- A company controlled by another company, called the parent. In accordance with Russian legislation, a business company is recognized as a subsidiary if another (main) business company or partnership due to... ... Technical Translator's Guide
- (subsidiary company) See: group of companies. Business. Explanatory dictionary. M.: INFRA M, Ves Mir Publishing House. Graham Betts, Barry Brindley, S. Williams and others. General editor: Ph.D. Osadchaya I.M.. 1998 ... Dictionary of business terms
- (subsidiary) A company owned or controlled by another company. Exists large number options for the scope of authority that subsidiaries may have with respect to decentralized decision-making on issues such as... ... Economic dictionary
SUBSIDIARY COMPANY- a company whose controlling interest is in the hands of another parent company. The size of the block of shares required for real control over the company is determined not only by its share in the total share capital (voting shares), but... ... Foreign economic explanatory dictionary
Subsidiary- a company is a subsidiary of another company, which in this case is called the parent, if the latter owns more than 50% of the share capital or if it exercises effective control, which is determined by ... ... Glossary of terms on expertise and real estate management
SUBSIDIARY COMPANY- - a business company in conditions where “another (main) business company or partnership, due to its predominant participation in its authorized capital or, in accordance with the agreements concluded between them, can determine decisions... ... Economics from A to Z: Thematic Guide
SUBSIDIARY COMPANY- SUBSIDIARY COMPANYA corporation controlled by another corporation. Control is ensured by the controlling corporation having all or part of its voting shares, interlocking directorship, leasehold relationships, or common interests. Many... ... Encyclopedia of Banking and Finance
Subsidiary- (SUBSIDIARY) A company that is controlled by another company (known as the parent company) ... Finance and stock exchange: dictionary of terms
A subsidiary is a business company whose decisions are determined (or may be determined) by another (main, parent) business company due to the latter’s predominant participation in its authorized capital (the amount of predominant participation ... Wikipedia
Subsidiary- – a branch of the parent (parent) company, under its control. Maintains legal independence. In case of losses or bankruptcy, the parent company is not responsible for the subsidiary... Commercial power generation. Dictionary-reference book
Books
- From mathematics to generalized programming, Stepanov Alexander, Rose Daniel E.. In this thorough and at the same time accessible book, the designer of innovative software Alexander Stepanov and his colleague Daniel Rose explain the principles of generalized...
Every entrepreneur, as well as founder, sooner or later has a question: to open a subsidiary or not? What is the difference between a subsidiary, a branch and a representative office? Does the parent organization really receive significant benefits when opening a reporting one? Let's take a closer look at these legal issues.
The parent company is...
A parent company is a founder that owns a controlling stake in a subsidiary (50% or more). In other words, this is the main economic society.
Here are some powers of the “mother”:
- Has the right to conduct certain operations and participate in the production of certain goods of a subordinate company.
- Implements organizational and economic principles of management.
- Develops specific goals, controls the direction and development of both the company and its divisions.
- She is responsible for the distribution of profits.
- This company controls not only its financial planes, but also their use in its divisions.
- Makes a decision on liquidation or reorganization subsidiary.
In order to improve the performance of a subsidiary, the founder can carry out. This analysis reveals the strengths and weaknesses financial activities business.
The subsidiary is...
A subsidiary is a branch of a large corporation with its own shares. When an established company gains momentum, there is a need to create subsidiaries. Since investments in the subsidiary are made by the main one, it also controls it in accordance with the concluded agreement. Most of the decisions made by the “daughter” come into force only after agreement with the maternal center.
The parent company is fully responsible for the subsidiary to the state regulatory authorities. It is mandatory to register a subsidiary in the manner prescribed by legislative acts. Successful interaction between “mother” and “daughter” is possible only if the subordination at work.
A subsidiary is a separate legal entity. Essentially, it deals with itself economic activity. Personnel issues and marketing strategy V this enterprise is taken over by the leader. The set of rules establishing the order of work constitutes the mother center. But, according to the Charter, for decisions made The “daughter” is responsible. Well, capital management is the responsibility of the main organization.
Pros and cons of a subsidiary
The strengths of the “daughter” include the following features:
- A subsidiary cannot be declared bankrupt because the entire responsibility for financial management lies with the parent company.
- The marketing strategy for subsidiaries is developed by its founder. This means that he is the guarantor of product quality. The situation allows you to use the reputation of the main company, its symbols, etc., which has been developed over a long time.
- The subsidiary company does not need to worry about calculations and budgeting, because the parent company handles the accounting.
- The parent organization is fully responsible for the expenses of the subsidiary and pays its debts.
The main disadvantages in organizational and legal relations that characterize a subsidiary:
- Deprivation of the opportunity for self-development and the introduction of rational proposals for broader activities, and as a result, dependence on the parent company. For example, when considering, a subcompany must take into account the opinion of the main one.
- Restrictions on the use and distribution of fixed capital, since this is done by the management of the main company according to a clearly defined plan.
- In the event of bankruptcy, the influence of the “mother” or branches dependent on it on the “daughter” up to the termination of the latter’s activities with the seizure of its funds to pay off debts.
Features of opening a subsidiary company
Why are such companies formed and what is required to open them? Here are the main goals:
- “Subsidiaries” are often created for use by large corporations when various problems arise in the course of their activities. This is an opportunity to start a business with " clean slate”, without taking into account past debts. An additionally created organization can become useful in improving the administration system and getting rid of routine work.
- The subsidiary company helps resolve issues with personnel selection and participate in the fight against competitors. The holding gains an advantage in the market by opening more subsidiaries.
- “Daughters” also help a lot with development foreign economic activity. Concluding transactions with foreign counterparties will play into your hands (savings are achieved thanks to tax benefits). In many ways, the prosperity of a business depends on the ability to organize correctly. New contacts and connections (including abroad) - additional opportunities and results.
- The creation of a subsidiary increases the stability of the parent company. This, in turn, provides an excellent chance to increase financial flows and investments, and rationally use assets and resources.
- Sometimes a strategy is used in parallel with the opening of a subsidiary organization. This is an opportunity to engage in a new activity and reduce risks.
To achieve the above goals, the subsidiaries are assigned the following tasks:
- Improving the quality and, as a result, the competitiveness of manufactured goods or services provided.
- Attracting specialists to management bodies.
- Minimizing cooperation ties with the parent organization.
When opening a subsidiary company you will need:
- Documents of the ruling and Charter of the subsidiary organizations.
- A legally certified decision on Form P11001 to form a subsidiary.
Important: documentary evidence that is missing indicates the solvency of the founder.
Responsibility of the parent organization
At the legislative level, three cases of liability were previously provided for:
- When the relationship between the parent and subsidiary companies was proven.
- If the main organization obliges the subsidiary to take part in the transaction. This instruction had to be documented. In this case, both entities are subsidiarily liable to general obligations, which means that if adverse consequences arise, either of the firms must repay the debt to creditors.
- If, as a result of the order of the parent enterprise, the subsidiary suffered losses and became bankrupt. In this case, subsidiary liability also applies. The parent company must repay part of the subsidiary's debt.
Thanks to innovations in the Civil Code of the Russian Federation, the rule for holding the main company liable for the debt obligations of its subsidiary has been simplified. That is, there is no need to prove the right of the parent company to give instructions to the subsidiary in the latter’s Charter or in the agreement between these two organizations.
How does a subsidiary differ from a branch and representative office?
Branch- this is a division of a legal entity that is located outside its territory and performs most of its functions, including the function of representation. It is entered into the unified state register, and in its activities it uses the property of the parent company and works on the basis of its provisions. A legal entity appoints branch managers who perform their duties in accordance with the provided power of attorney.
Representation- is a separate division of a legal entity that does not have legal status. Its function is to represent the interests of society and protect them. The principle of operation is in many ways similar to a branch: all actions are carried out with the consent of the legal entity, this also applies to the appointment of managers.
Distinctive features of subsidiaries:
- The parent company exercises relative control over the subsidiary, grants it legal autonomy and thus influences decision making. In contrast, a dependent company does not have the right to make any decisions at all without discussion with the parent organization.
- The “subsidiary” has the status of a legal entity, which is not typical for branches and representative offices. This means that similar company may be located on the main territory, which is excluded for branches.
- A subsidiary can be in any legal form.
Thus, subsidiaries are more independent structural units, since they have more rights and powers, and also own property on a proprietary basis. Branches and representative offices have more limited business management capabilities.
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In general, opening a subsidiary organization has a number of advantages, but, on the other hand, it imposes legal liability. With a properly drawn up business plan, a subsidiary can significantly increase the company’s income and reduce risks. Such expansion of activities is enough interesting phenomenon, which deserves close attention.
Don't know what a subsidiary is? Let's consider its main features, advantages and disadvantages, as well as the creation procedure.
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We present the data that is prescribed in the legislation of Russia in 2019. When opening a branch or subsidiary, the founders must take into account all the differences.
While many people have at least heard something about branches, few people know about a subsidiary company. We will determine whether it is worth giving preference to a subsidiary company by considering all the nuances of work and opening.
Important aspects
Almost all large organizations were created spontaneously - some companies were bought and others were sold. But when the assets had already become identified, the spontaneous restructuring that exists in our time began to take place.
Therefore, the question still remains - to prefer branches or a network of subsidiaries when expanding a business. There is no single answer.
The decision should be made at the head office, which will take into account the strategic goals and type of activity. Typically, branches are opened by companies that have one line of business. Most prefer to create subsidiaries.
Highlights
The company has the right to have a subsidiary and dependent business company, which will have the right of a legal entity.
They should be created in accordance with the requirements of the law of Russia, and in the case of creation outside the country and the laws of the relevant state, unless other norms are established.
A company becomes dependent if the company has more than 20% of its authorized capital.
Advantages and Disadvantages
Let's note the positive points:
Disadvantages of such an enterprise:
| No freedom of action | Since it is necessary to carry out the tasks set by the parent company. The subsidiary produces what is imposed on it |
| There is no way to control deliveries | Production and finance. And this complicates technical development |
| All funds are managed by the parent company | And therefore it is difficult to invest capital in a subsidiary. The parent company allocates some funds, which are fully distributed |
| If the parent community has several subsidiaries | Then, if they go bankrupt, he has to compensate for losses. And the funds are allocated from the income of another subsidiary. In case of severe bankruptcy, the subsidiary company will also have to be closed. Only a sponsor or another company can correct the situation |
Legal grounds
When creating a subsidiary, you should take into account the provisions.
The rules for opening a branch are also considered in the document that was adopted by the government on December 26, 1995.
You should also be guided by separate provisions.
What does subsidiary mean?
A subsidiary is a branch of a large joint stock company. It is created if there is a need to expand the activities of the main enterprise.
Such a company is managed by the parent company, since it was initially created with the money of such a company. The subsidiary must be subordinate to the parent community.
The parent company bears responsibility for the subsidiary to government agencies; it is under its control.
A subsidiary company (as a legal entity) is created by other companies, transferring part of their property to it for economic management.
The founders must approve, determine who will be the manager, and exercise other rights of the business owner in accordance with the law.
The structure of the subsidiary is the same as the structure of the parent company. If several subsidiaries are created, a holding is formed.
To exercise control over its subsidiaries, the parent company may have a controlling stake. It also has the right to enter into agreements or indicate in the charter, setting out the conditions for agreeing on a development strategy.
What is the difference with a branch
A subsidiary and a branch are not exactly the same thing. The difference is the autonomy of the structure of the subsidiary from the parent company, but at the same time the presence of an inextricable connection with it.
This allows you to redefine other differences between a subsidiary and a branch.
The parent company that heads the subsidiary has the right to create branches in one territorial district and subsidiaries in another. All structures can have the same goal.
Therefore, in practice, the activities of a branch and a subsidiary have similarities. They have only distinctive statuses based on legal characteristics.
The branch is an independent division, but bears limited responsibility. It is located outside the location of the main organization.
It is not a separate legal entity and does not have its own property. Managers are appointed at the head office, and they have the right to act only on the basis of a power of attorney.
Video: creation of a subsidiary of Ethtrade. Main news from the conference in Sochi
A subsidiary company is an independent legal entity. It is created according to the same rules as an LLC. She has her own property authorized capital, and also bears responsibility for its activities.
The company has the right to act on its own behalf, while the branch acts on behalf of the main organization.
Opening order
Nowadays it is much easier to create limited liability companies. First you need to collect and issue the necessary certificates.
You will need:
- charter of the subsidiary;
- documentation of the parent organization;
- decision to create a subsidiary;
- statement ;
- a certificate confirming that the company has no debts.
There are 2 options for creating a subsidiary. The first option is as follows. First, the charter of the subsidiary is drawn up, reflecting all the necessary conditions.
If a company has several founders, then an agreement on the distribution of shares is written. Next comes the preparation of the protocol by the founders.
This document will confirm the creation of a subsidiary. When creating a company, the founders must indicate its location and contacts.
Responsibility of the parent organization
The subsidiary is usually independent and has its own capital and property. It is not responsible for the debts of the parent organization, and the parent company is also not held liable for the debts of the subsidiary.
But the controlling enterprise must be responsible for the debt and risks of the subsidiary only in the following situations:
In the first situation, one of the debtors must pay off all obligations with creditors, and then the others are not liable for their debts.
In the second situation, the parent company must pay off the debt of the subsidiary, which it is not able to pay itself from its own property.
The parent company also creates a subsidiary organization to distribute the company's resources and allocate the most promising directions in specialization.
Therefore, the competitiveness of the entire enterprise increases. The subsidiary can carry out routine responsibilities, and through this the management of the entire company can be optimized.
With the transfer price and transactions, the number of tax and financial losses and costs is reduced.