Branch vs Subsidiary – Difference and Comparison

What is Branch?

A branch in business is a separate unit or office of a company that is under the same overall umbrella company and is located in a different area from the company’s headquarters. It could be in different cities, states, or countries.

It is a division of a business that has a specific area of focus and often has its own staff and management. For example, a company might have a marketing branch, a sales branch, and a customer service branch.

Branch offices are often used to expand a company’s reach into new markets, or to serve as a base of operations for sales or other activities in geographic areas where the company does not have a physical presence.

By opening a branch office in a new location, a business can tap into a new market and potentially increase its customer base and revenues. Additionally, a branch office can provide a business with the presence in a new location, which can be helpful for building brand awareness and establishing a local customer base.

What is Subsidiary?

A subsidiary is a business entity that is owned or controlled by another company, known as the parent company. The term can also refer to a division or business unit of a company. The parent company has a majority ownership stake in the subsidiary, meaning it has more than 50% of the voting rights.

A subsidiary can be a company, corporation, or limited liability company. A subsidiary may be a separate legal entity from the parent company, or it may be an unincorporated entity that is wholly owned by the parent company.

A subsidiary may be wholly owned by the parent company or it may be partially owned. The degree of control the parent company has over the subsidiary may vary, but the parent company has the power to appoint the majority of the board of directors of the subsidiary.

The parent company can also control the subsidiary’s finances, and the subsidiary must follow the parent company’s guidelines for financial practices. For example, if the parent company has a strict policy on expenses, the subsidiary must follow this policy.

Difference Between Branch and Subsidiary

  1. A branch is a separate business entity that is affiliated with a larger company, while a subsidiary is a separate business entity that is wholly owned by a larger company.
  2. A branch is an extension of a company that is in different location. A subsidiary is a unit that is owned by another company.
  3. A branch is a location of a company that is separately operated from the company’s main headquarters, while a subsidiary is a company that is fully owned and controlled by another company.
  4. A branch is defined as a local office of a company that is managed by a regional director, while a subsidiary is a company that is owned or controlled by another company, known as the parent company.
  5. The main difference between a branch and a subsidiary is that a subsidiary is its own legal entity, separate from the parent company, while a branch is not. This means that a subsidiary can enter into contracts, sue and be sued, and own property in its own name, while a branch cannot.

Comparison Table Between Branch and Subsidiary

Parameters of ComparisonBranchSubsidiary
Ownershipowned by the parent companyowned by the parent company with a separate legal entity
Employeesunder the direct supervision of the branch managerunder the supervision of the president or CEO of the subsidiary
Managerial controlmanaged by the parent companymanaged by its own board of directors
Tax Statustaxed as part of the parent companytaxed as a separate entity
Locationlocated in the same country as the parent companylocated in any country