Definition of Affiliation and Subsidiary

Definition of Affiliation and Subsidiary

The USCIS guidelines include definitions of affiliate and subsidiary to determine whether an employer is qualified to use the first preference.

Both terms, affiliate, and subsidiary are used often used in the business field. However, most people don’t know how to differentiate them. As a result, people freely mention these terms in everyday conversations and even informal debates without knowing they may be misusing them. The two words share only one similarity. Both affiliates and subsidiaries are measurements of ownership that the leading company holds over other smaller companies.

A company that acts as a subsidiary to the leading company has a significant share of its stocks controlled by the primary company. There are even cases when the primary company handles all of the stocks of a subsidiary.

On the other hand, an affiliate company only has a minor share of its stocks controlled by the primary company.

Summary

Both subsidiary and affiliate refer to a company with a portion of its stocks controlled by the primary company.

Subsidiary companies have the majority of their stocks controlled by the primary company. However, wholly-owned subsidiary companies have all of their stocks held by the primary company.

Affiliate companies have only a minor portion of their stocks controlled by the primary company.

Banks and multinational corporations use a strategy called foreign direct investment. They create affiliates or subsidiaries to penetrate a target market they have difficulty entering if they use their primary name.

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