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Why PFE Management a Wholly Owned Subsidiary?

We live in a globalized world where organizations are expanding in finance and operations. Companies typically seek to enter the global markets by setting up subsidiaries.

Subsidiaries are a company that works under a parent or holding company. A subsidiary is a kind of company where the majority of shares are controlled by a parent company or holding company. These shares can also be owned by a completely different company managed by someone else. For a company to be called a subsidiary, another firm must hold a minimum of 50% shares. However, if a company owns 100% of the other company's shares, it is called a wholly owned subsidiary.

The percent of holding decides the kind of control a parent company has over a subsidiary. There are several advantages of a wholly owned subsidiary.

How does a wholly owned subsidiary work?

In a wholly owned subsidiary, minority shareholders are absent since the parent business owns all shares. Operations at a wholly owned subsidiary are controlled and approved by the parent organization. These subsidiaries may or may not have direct input into its activities and management. Consequently, it could become an unconsolidated subsidiary.

Advantages of a wholly owned subsidiary

There are several advantages of a wholly owned subsidiary. A wholly owned subsidiary allows tax benefits, has limited liability, and promotes diversification.

Knowing the advantages of a wholly owned subsidiary will help you realize how to reap the optimal benefits of a subsidiary.

Financial Advantages

• Easy reporting: The reporting procedure in a wholly owned subsidiary is relatively straightforward. Generally, the parent company takes charge of consolidating all the subsidiary's financial statements. Hence, the burden of creating different financial statements is not on the subsidiary. Further, all kinds of assistance are provided to the subsidiary when the parent company consolidates all the financial statements into a single one.
  

• Access to more resources: The financial resources at the company’s disposal increase as the parent firm can arrange for more financial resources as it receives all earnings from the subsidiary. Parent companies can use these funds to grow the company or invest in other businesses that can create value for it and improve ROI.
  

• Reduces cost: The subsidiary's costs also go down as the parent company takes care of all pivotal overhauls. Also, there can be a mutual understanding between the parent company and the wholly owned subsidiary where they mutually benefit from shared resources. This reduces the cost of procuring new technology and making changes in the financial systems as the parent company will already use its resources to understand the changes in the financial systems.
  

• Low tax liability: One of the most notable financial advantages of wholly owned subsidiary is lower tax liability. Companies owning multiple subsidiaries can counterbalance the profits of one subsidiary with the losses of another, resulting in lower tax liability.
  

Operational Advantages

• Easy operations: The parent company has complete control over a wholly owned subsidiary and can make any decisions concerning the subsidiary. The parent company can fully control all operations and strategically control the wholly owned subsidiary.
  

• Better negotiations: When a parent company and wholly owned subsidiary work together and share a business relationship, they gain more substantial negotiating power. This business relation gives them the authority to negotiate better with suppliers and other stakeholders that might impact these companies.
  

• Vertical integration: Vertical integration occurs when a strategic relationship exists between the parent company and the wholly owned subsidiary. This increases the competitiveness of the companies that constantly try to outperform each other.
  

• Access to parent company’s resources: The best part of being a wholly owned subsidiary is accessing all the parent company's resources. However, this works the other way, too. Both companies can use each other's resources which are not limited to assets and property. The two organizations can also utilize expertise in finance and marketing to grow. This, in turn, brings down any administrative overlap and promotes seamless integration between the two companies.
  

Strategic Advantages

• Easy decision making: The decision-making process becomes easy and quick as the business model becomes flexible. The parent organization can give a direction to the wholly owned subsidiary, and the subsidiary, in turn, can follow its footsteps and prioritize what seems necessary.
  

• Better synergy: Promotion of synergies between the two companies in different verticals like information technology, finance, marketing, etc., can benefit the parent company and subsidiary in terms of cost reduction and strategic positioning. Also, research and development become better when two companies come together. The strategic support lasts long, giving confidence to the wholly owned subsidiary.
  

• Improved risk-taking ability: As a parent company backs the wholly owned subsidiary, it can afford to take risks by diversifying business and entering new markets. Also, if the parent acquires a foreign subsidiary, they can use it to strengthen their foothold in that country.
  

• Limited liability of owners: A wholly owned subsidiary is a separate legal entity. The parent-subsidiary structure helps the company strategize and mitigate business-related risks. The losses incurred by the subsidiary may not affect the parent company.
  

• Better risk mitigation: Parent companies can also use their data access and security directive for the wholly owned subsidiary to mitigate the risk of theft of technology and intellectual property loss.
  

FAQs

PFE Management LLC

PFE Management is the manager for PathFree Expansion LLC

PathFree Expansion LLC is professionally managed by PFE Management LLC, a wholly owned subsidiary of PathFree Technologies Corporation.

Is a wholly owned subsidiary a disregarded entity?

A wholly owned subsidiary must pay taxes, but the parent company looks after the financial statements; therefore, it is not a disregarded entity.

What kind of control does a parent company have over a wholly owned subsidiary?

A parent company has full financial, operational, and strategic control over a wholly owned subsidiary.

PFE Management Follows the same corporate values as our parent company

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