When one company owns more than 50 percent of another company, the company of which it has majority ownership—and over which it therefore has control—is its subsidiary.
A company that owns more than 50 percent of another is called its parent company.
Wholly owned subsidiary means the parent company owns 100 percent of the subsidiary's stock.
Because the company is wholly owned, the parent company must account for the subsidiary using the acquisition method of accounting. This determines how the subsidiary appears on the parent's financial statements. This also means the companies must issue consolidated financial statements.
- Medioimages/Photodisc/Photodisc/Getty Images