Sage-Tips

Can a parent company sell to a subsidiary?

The parent company uses its own assets to launch a new, independent firm. In this case it can either retain the new company as a wholly owned subsidiary or it can sell some of the new subsidiary’s stock. A subsidiary operates independently of the parent company and is a separate legal entity.

Can a subsidiary have the same name as the parent company?

Must the subsidiary company share the same name as its parent company? The name of the company is your decision, and it need not be the same as the parent company. However, the names of companies are subject to review by the authorities if it contains sensitive words, or if the name is similar to an existing company.

Do subsidiaries have the same tax ID as the parent company?

A subsidiary of a corporation and its parent corporation also have separate tax identification numbers for federal tax purposes. Also known as Employer Identification Numbers, the Internal Revenue Service issues these nine-digit numbers to identify business entities.

Can a subsidiary own shares in its parent?

Therefore, there was a situation where a wholly-owned subsidiary (Company A) owned a minority stake in its parent (Company B). Section 23 of the CA 1985 states that a company cannot be a member of its holding company and any allotment or transfer of shares in a company to its subsidiary is void.

Does you need an EIN for a subsidiary?

Corporations. You will be required to obtain a new EIN if any of the following statements are true. You are a subsidiary of a corporation using the parent’s EIN or you become a subsidiary of a corporation. You change to a partnership or a sole proprietorship.

Can a parent company be sued for a subsidiary?

In the U.S., the general rule is that parent companies generally are not liable for the actions of its subsidiaries unless the plaintiff can prove an agency or alter ego relationship. Absent such a relationship, the foreign subsidiary must be joined to the lawsuit for the court to order complete relief.

Is parent company liable for subsidiary negligence?

Parent company: responsibilities in tort Whilst a company will not be liable for the acts of its subsidiary by reason only of its shareholding, it may owe its own duty of care towards the employees of the subsidiaries.

Which company sells inventory to its subsidiary at a profit during 2012?

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2012, which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory?

Can a parent company own a subsidiary company?

Parent companies can either establish their own subsidiaries or can purchase an existing company. Despite the name “parent company,” the relationship between a parent company and its subsidiaries is not the same as a parent and child relationship. While the parent company does hold influence over the subsidiary company,

What happens when one subsidiary sells merchandise to another subsidiary?

When one subsidiary sells merchandise to another subsidiary, the eliminating entries are identical to those presented earlier for sales from a subsidiary to its parent.

What are the rights of a parent company’s subsidiaries?

As a majority stockholder, the parent company has the ability to remove or appoint board members for the subsidiary company and is also allowed to decide how the subsidiary will operate. That being said, subsidiary companies do retain some rights. As the subsidiary company maintains some independence, it will have a variety of responsibilities: