Upon reaching a decision to organize or acquire a subsidiary corporation, the business enterprise parent controls its subsidiary by being its sole stockholder.
By holding, i.e., owning all of the subsidiary’s voting stock, the parent has the power to elect and remove the entire board of directors.
These subsidiary corporations may be for-profit subsidiaries, or in some cases even nonprofit subsidiaries.While his heart may be difficult to ensnare at the onset of a relationship, once he falls for a Gemini woman he is typically hooked for the long haul.Instead of burning hot and quickly, his passions grow steadily with a kind of strength and commitment that most lovers can only dream about.These reasons often include, for example: (1) the parent company desires to engage in a new line of business activity unrelated to its current business; (2) the existing or projected revenues from the new line of business activity are substantial; (3) the business enterprise prefers not to expose its assets to the liabilities associated with the new business line; or (4) the new business activities may carry risks of liability unacceptable to the parent; (5) the parent is a public corporation and it desires to keep the subsidiary privately held; (6) the parent wants to posture the subsidiary for going public without affecting the parent’s shareholders; or (7) that the organization desires to reward certain employees with increasing compensation, etc.It is common to use the term “parent/subsidiary” when describing the relationship between a business enterprise and its subsidiary. The term “parent/subsidiary” is not equivalent to the term “parent/child”. While the parent business enterprise may incorporate its subsidiary corporation, name its board of directors and officers, enunciate the subsidiary’s business purpose, adopt bylaw provisions preserving the parent’s control of its subsidiary, etc., it is important that the subsidiary be established and recognized by the parent, as well as third parties, as an independent corporation managed by a board of directors.