subsidiary
Definition
A subsidiary is a company that another company, called the parent company, owns and controls. The subsidiary operates as its own separate legal entity, which means it can sign contracts, own property, and take on debt in its own name. Business owners often create subsidiaries to keep different parts of their business legally separated from each other.
Example
If you own a restaurant business and you want to open a catering arm, you might set up a separate subsidiary company for the catering operation so that a lawsuit against the catering business cannot touch the restaurant's assets.
Watch Out
Even though a subsidiary is legally separate, courts can sometimes hold the parent company responsible for the subsidiary's actions if the two businesses are run in a sloppy or intermingled way.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.