In today’s world, all businessmen want to expand their business on several levels and two common strategies they follow are to set up new branches and subsidiaries. In this article, we are going to explain the difference between subsidiary and branch which will be conducive to remove all the confusion regarding this topic.
Subsidiary vs Branch
The main difference between subsidiary and branch is branches are a part of the parent organization which provides the same services in different places as the parent company.
On the other hand, subsidiaries are run and controlled by other companies. They have legal entities and work separately from the parent company.
Difference between subsidiary and branch
| Subsidiary | Branch |
| Subsidiaries work separately from the parent company. | Branches are part of the parent organization which provides the same services in different places as the parent company. |
| It reports to the holding company. | It reports to the head office. |
| The subsidiary can conduct the same or different business from the parent organization. | It conducts the same business as its parent organization. |
| The account is maintained separately. | It can maintain accounts separately or jointly. |
| Subsidiaries have separate legal standing. | The branch doesn’t have separate legal standing. |
| 50-100% investment is needed for the parent company to open a subsidiary. | 100% investment is needed for the parent company to open a branch. |
| Subsidiary use their own operating systems. | Branches use the operating systems used by their parent company. |
What is Subsidiary
The subsidiary is a separate company that is fully or partially owned by another parent company. Example: The parent company of Google is Alphabet.
Subsidiaries are independent companies as they run separately from their parent company. But their shares are held by the parent company and it’s a way of expanding business nowadays.
Subsidiaries can conduct the same or different business from the parent organization. The account is also maintained separately in subsidiaries. It has separate legal standing. It also uses its own operating system. So it can easily be guessed that without holding the shares, subsidiaries work fully separated from the parent company.
Related: Difference Between Audit and Inspection (With Table).
What is Branch
The branch is the same company that conducts the same business as its parent company in different locations.
Branches are not independent as subsidiaries. They run under the name of their parent company and conduct the same business but in different locations. To expand the business and to run the same business in different locations, companies open several branches.
Conclusion
Branches and subsidiaries are two common ways to expand business followed by the businessmen. But these two are not the same. We hope confusion regarding the difference between subsidiary and branch has eliminated after going through this article.
Summary
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- From the parent company subsidiaries work separately. On the other hand, branches are part of the parent organization which provides the same services in different places as the parent company.
- The parent company needs 50-100% to open a subsidiary. But 100% investment is needed for the parent company to open a branch.
- separate legal standing exists in Subsidiaries But separate legal standing doesn’t exist in branches.
- Same or different business can be conducted through subsidiaries but branches conduct the same business.
- For subsidiaries, an account is maintained separately. On the other hand, for branches, accounts can be maintained jointly or separately.
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The FAQs about Subsidiary vs Branch
For any further queries, you may check the FAQ section. You can also put your queries or comments about this article in the below comment section.
Can a branch have a branch?
As a branch runs the business with the same title as its parent company, so the branch can also have a branch with the same name and business.
Does a branch have separate legal personality?
No, the branch doesn’t have a separate legal personality.
Is a parent company responsible for a subsidiary?
No, the parent company is not responsible for a subsidiary.
What is the difference between a foreign branch and a subsidiary bank?
A foreign branch means the branch of the parent company which locates in another country but performs the same business. A subsidiary bank is a bank which shares are held by its parent company but the parent company doesn’t conduct the same business as its.