Subsidiary vs. Associate — What's the Difference?
By Tayyaba Rehman — Published on November 25, 2023
A Subsidiary is a company controlled by a parent company, while an Associate is a company significantly influenced by another company, typically through ownership.
Difference Between Subsidiary and Associate
Table of Contents
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Key Differences
A Subsidiary company signifies a business entity that is fully or majorly owned and controlled by another company, referred to as the parent company. On the opposite spectrum, an Associate company implies a firm where another company holds a significant but not a majority interest, often reflected through a stake of 20% to 50%. These definitions underscore the nature of the control and influence that one company exerts over the other.
The primary distinction between a Subsidiary and an Associate is indeed the degree of control exercised by the owning company. A parent company with a Subsidiary has the majority stake, allowing it to make unilateral decisions, while in the Associate relationship, the influence is substantial but not overarching, due to a lesser ownership stake, thereby providing a collaborative decision-making scenario.
In terms of financial reporting, Subsidiaries’ finances are typically fully consolidated with the parent company because the parent company has comprehensive control. Contrastingly, in the context of Associates, the investing company often uses the equity method for reporting financial interest since it doesn’t have unilateral decision-making power, reflecting distinct financial management and reporting practices between Subsidiary and Associate entities.
Moreover, Subsidiaries can be created when a company purchases a majority stake in an existing company or develops a new entity. Associates, however, are recognized when an investing company purchases a significant, but non-majority stake, showcasing differing formation or identification paths for Subsidiaries and Associates.
From a legal perspective, Subsidiaries can act independently, but their actions and decisions are usually in alignment with the parent company due to the ownership and control held. For Associates, the investing company cannot dictate actions and decisions unilaterally, and thus, the Associate company retains higher autonomy in its operations, differentiating the legal and operational autonomy between Subsidiaries and Associates.
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Comparison Chart
Ownership
Majority (usually 50%+) ownership by parent company
20%-50% ownership without majority control
Control
Has direct control
Has significant influence but not direct control
Financial Reporting
Fully consolidated with parent company
Reported using equity method
Decision-making
Largely unilateral by parent company
Collaborative, influenced by owning company
Autonomy
Limited due to parent company control
Relatively higher due to lack of unilateral control
Compare with Definitions
Subsidiary
A Subsidiary is a company majority-owned by another entity.
The tech giant owns a Subsidiary specializing in AI research.
Associate
An Associate company is significantly, but not majority, influenced by an investor.
The firm became an Associate after a 30% stock purchase by the investor.
Subsidiary
It denotes a business fully consolidated with its parent company.
The parent company included its Subsidiary in the annual report.
Associate
It implies a company having substantial investment but without controlling stake.
The company, as an Associate, collaborated on projects without losing autonomy.
Subsidiary
Subsidiaries operate as distinct legal entities under parent company control.
The Subsidiary launched a new product line with approval from the parent company.
Associate
Associates maintain higher autonomy compared to Subsidiaries due to ownership structure.
The Associate embarked on distinct projects while sharing profits with its investor.
Subsidiary
It refers to a firm whose decisions are significantly influenced by its owner.
The Subsidiary relocated its headquarters as per parent company directives.
Associate
An Associate typically utilizes collaborative decision-making, respecting the investor's influence.
The Associate sought investor input before initiating a merger.
Subsidiary
Subsidiaries can act autonomously but within the purview of the parent company.
The Subsidiary opened international branches with strategic alignment to its parent.
Associate
To connect in the mind or imagination
"I always somehow associate Chatterton with autumn" (John Keats).
Subsidiary
Serving to assist or supplement; auxiliary.
Associate
To connect or involve with a cause, group, or partner
Wasn't she associated with the surrealists?.
Subsidiary
Secondary in importance; subordinate.
Associate
To correlate or connect logically or causally
Asthma is associated with air pollution.
Subsidiary
Of, relating to, or of the nature of a subsidy.
Associate
To join in or form a league, union, or association
The workers associated in a union.
Subsidiary
One that is subsidiary to another.
Associate
To spend time socially; keep company
Associates with her coworkers on weekends.
Subsidiary
A subsidiary company.
Associate
A person united with another or others in an act, enterprise, or business; a partner or colleague.
Subsidiary
(Music) A theme subordinate to a main theme or subject.
Associate
An employee, especially one in a subordinate position,
Subsidiary
Auxiliary or supplemental.
Associate
A companion; a comrade.
Subsidiary
Secondary or subordinate.
A subsidiary stream
Associate
One that habitually accompanies or is associated with another; an attendant circumstance.
Subsidiary
Of or relating to a subsidy.
Subsidiary payments to an ally
Associate
A member of an institution or society who is granted only partial status or privileges.
Subsidiary
A company owned by a parent company or a holding company, also called daughter company or sister company.
Associate
Joined with another or others and having equal or nearly equal status
An associate editor.
Subsidiary
(music) A subordinate theme.
Associate
Having partial status or privileges
An associate member of the club.
Subsidiary
One who aids or supplies; an assistant.
Associate
Following or accompanying; concomitant.
Subsidiary
Furnishing aid; assisting; auxiliary; helping; tributary; especially, aiding in an inferior position or capacity; as, a subsidiary stream.
Chief ruler and principal head everywhere, not suffragant and subsidiary.
They constituted a useful subsidiary testimony of another state of existence.
Associate
Joined with another or others and having lower status.
The associate editor is someone who has some experience in editing but not sufficient experience to qualify for a senior post.
Subsidiary
Of or pertaining to a subsidy; constituting a subsidy; being a part of, or of the nature of, a subsidy; as, subsidiary payments to an ally.
George the Second relied on his subsidiary treaties.
Associate
Having partial status or privileges.
He is an associate member of the club.
Subsidiary
One who, or that which, contributes aid or additional supplies; an assistant; an auxiliary.
Associate
Following or accompanying; concomitant.
Subsidiary
An assistant subject to the authority or control of another
Associate
Connected by habit or sympathy.
Associate motions: those that occur sympathetically, in consequence of preceding motions
Subsidiary
A company that is completely controlled by another company
Associate
A person united with another or others in an act, enterprise, or business; a partner.
Subsidiary
Relating to something that is added but is not essential;
An ancillary pump
An adjuvant discipline to forms of mysticism
The mind and emotions are auxilliary to each other
Associate
Somebody with whom one works, coworker, colleague.
Subsidiary
Functioning in a subsidiary or supporting capacity;
The main library and its auxiliary branches
Associate
A companion; a comrade.
Associate
One that habitually accompanies or is associated with another; an attendant circumstance.
Associate
A member of an institution or society who is granted only partial status or privileges.
Associate
(algebra) One of a pair of elements of an integral domain (or a ring) such that the two elements are divisible by each other (or, equivalently, such that each one can be expressed as the product of the other with a unit).
Associate
(intransitive) To join in or form a league, union, or association.
Associate
(intransitive) To spend time socially; keep company.
She associates with her coworkers on weekends.
Associate
To join as a partner, ally, or friend.
He associated his name with many environmental causes.
Associate
(transitive) To connect or join together; combine.
Particles of gold associated with other substances
Associate
(transitive) To connect evidentially, or in the mind or imagination.
Associate
To endorse.
Associate
(mathematics) To be associative.
Associate
To accompany; to be in the company of.
Associate
To join with one, as a friend, companion, partner, or confederate; as, to associate others with us in business, or in an enterprise.
Associate
To join or connect; to combine in acting; as, particles of gold associated with other substances.
Associate
To connect or place together in thought.
He succeeded in associating his name inseparably with some names which will last as long as our language.
Associate
To accompany; to keep company with.
Friends should associate friends in grief and woe.
Associate
To unite in company; to keep company, implying intimacy; as, congenial minds are disposed to associate.
Associate
To unite in action, or to be affected by the action of a different part of the body.
Associate
Closely connected or joined with some other, as in interest, purpose, employment, or office; sharing responsibility or authority; as, an associate judge.
While I descend . . . to my associate powers.
Associate
Admitted to some, but not to all, rights and privileges; as, an associate member.
Associate
Connected by habit or sympathy; as, associate motions, such as occur sympathetically, in consequence of preceding motions.
Associate
A companion; one frequently in company with another, implying intimacy or equality; a mate; a fellow.
Associate
A partner in interest, as in business; or a confederate in a league.
Associate
One connected with an association or institution without the full rights or privileges of a regular member; as, an associate of the Royal Academy.
Associate
Anything closely or usually connected with another; an concomitant.
The one [idea] no sooner comes into the understanding, than its associate appears with it.
Associate
A person who joins with others in some activity;
He had to consult his associate before continuing
Associate
A person who is frequently in the company of another;
Drinking companions
Comrades in arms
Associate
Any event that usually accompanies or is closely connected with another;
First was the lightning and then its thunderous associate
Associate
A degree granted by a two-year college on successful completion of the undergraduates course of studies
Associate
Make a logical or causal connection;
I cannot connect these two pieces of evidence in my mind
Colligate these facts
I cannot relate these events at all
Associate
Keep company with; hang out with;
He associates with strange people
She affiliates with her colleagues
Associate
Bring or come into association or action;
The churches consociated to fight their dissolution
Associate
Having partial rights and privileges or subordinate status;
An associate member
An associate professor
Associate
It refers to a company with external influential investment affecting operational strategies.
The investor’s significant stake impacted the Associate’s strategic market approach.
Common Curiosities
What defines a Subsidiary?
A company majority-owned by another company is a Subsidiary.
What is an Associate?
An Associate is a company with substantial, non-majority ownership from another entity.
How does ownership differ between Subsidiary and Associate?
Subsidiary implies majority ownership; Associate reflects 20%-50% ownership.
How is control exerted in a Subsidiary?
The parent company exercises direct control over a Subsidiary.
What type of control is observed with Associates?
The investor has significant influence but not control over Associates.
Are Subsidiaries financially independent?
Subsidiaries’ financials are typically fully consolidated with the parent company.
How are Associates reported financially?
Associates are often reported using the equity method in financial statements.
What decision-making capacity do Associates have?
Associates retain more decision-making autonomy compared to Subsidiaries.
How are Subsidiaries formed?
Through creating a new entity or acquiring majority ownership in an existing one.
Can Subsidiaries make independent decisions?
Subsidiaries have limited autonomy, adhering to parent company directives.
Can a Subsidiary become an Associate?
Yes, if the parent company reduces its stake below majority ownership.
Is a Subsidiary’s failure a direct risk to the parent company?
Yes, financial and reputational risks can directly impact the parent company.
What makes a company an Associate?
Acquiring a significant, non-controlling stake turns a company into an Associate.
Can an Associate’s actions impact the investing company?
Yes, despite lower control, actions of an Associate can influence the investor’s standing.
How do Associates and Subsidiaries impact parent company profits?
Both can contribute to profit through shared revenues or consolidated financials.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
