Subsidiary companies are a common way in which multinational corporations organize their business development and/or operationality.
But, what’s a subsidiary company and how does it works?
Well, a subsidiary company (also known as a daughter) is a firm that is owned or operated under the control of another one (a parent company). As surprising as it might sound in some cases in a business environment companies tend to subsidize others for taxation, regulation, and liability purposes.
So what are the basics when it comes to setting up a subsidiary company in the UK?
Well, first of all, it is highly recommended to start with forming a small company because it’ll be easier!
Then, it is a must to set the governing, laws or rules under which the relationship between the parent company and the daughter will be based. This document is called “Articles of Association” and it can be conformed by variations like Model Articles (provides basic aspects or rules to follow), Standard Articles (specifies the rules between the involved companies a little bit more) and last but not least, the Fully tailored set of articles (perfect for cases in which many companies are involved or when it is important to set and specify each companie’s obligations).
Additionally, another important aspect to take into consideration is to identify and set apart conflicts of interests. When the leadership is owned by a single director, it is important to set rules in order to avoid possible conflicts based on single interests that could affect the company.
Keeping meticulous accounting records is obviously another important rule to follow when starting a subsidiary company, because this way the company will be safe from unknown money loss, and will be prepared for any investment that could benefit it.
This accounting records should contain important data like daily money entries, as each expended or invested amounts, and also, a record of all the assets and/or liabilities of the company.
Regarding the employees of the subsidairy, like with the parent company, all should be under an agreement or contract with the company. In such contracts, each should state the terms between the employee and the company, and the benefits and right provided for the employee.