How To Create A Subsidiary Company

Last Updated: Mar 18, 2021
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Setting up a subsidiary may make sense for your company. In the UK, it’s not as complicated as you may think to set one up. It follows almost the same process as setting up a standard company. This guide is going to teach you all about how you can go about setting up a subsidiary company without running into legal trouble.

What is a Subsidiary Company?

There’s often a lot of confusion regarding the position of the subsidiary company and what it does. A subsidiary company is a company that is either owned or owned in part by another company. The company that owns the subsidiary is known as a parent company or a holding company. It should be noted that a holding company does slightly differ from a parent company, though.

How To Set Up a Subsidiary

A subsidiary company may be partly owned or entirely owned by another company, but bear in mind that this isn’t like trading under a different name. The subsidiary is technically another company, so it has to be incorporated as one.

When forming your company with Your Company Formations you can easily choose to have a corporate ownership structure as opposed to a person. This would allow you to setup a subsidiary company through our online formation software. You need at least one person to submit the required documentation and to act as a director for the new company. This may be the same director as the one for the parent company.

You also need a registered office address. This office address has to be in the country you are setting the subsidiary up in, which is the UK in this case.

To setup one of these companies, you only need a sole director. The requirement for a company secretary was waived some years ago. The only restriction is that the sole director cannot then act as the company secretary. When you register as a sole director, you will enter both your residential address and a service address. Only the service address will appear in the public records.

The key here is that in the various documentation you submit regarding shareholders you will have both an individual director and another company as a shareholder. You are prohibited from having an entire company owned by another company.

Once you submit the documents, you will have a decision within 24 hours from Companies House.

Making Changes

Like with any other private limited company, you can make changes to your subsidiary after incorporation. You can sell part of the company to another company to give it multiple owners, or you could even transform the subsidiary company into a company that stands on its own.

Should You Setup a Subsidiary Company?

A subsidiary company is only necessary in a few scenarios. You need to think about setting up a subsidiary company if:

You are Operating Overseas – Foreign companies will always opt to setup a subsidiary company in the UK if their main company is based overseas. There are many tax and administrative advantages to doing this.

Two Different Businesses – Sometimes you may have different arms of your business that are so radically different that they need to be formally separated.

Team Differences – Some companies create a subsidiary if they have a team working on a different project at another office. The project is likely not relevant to the business’s primary purpose, so a subsidiary can allow them to make a formal separation.

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Conclusion

Opening up a subsidiary isn’t a decision that you should take lightly. It isn’t always necessary and it may be better to simply open a different company from scratch. You have to make this decision by yourself. And it may be better to employ a professional agent to help with the opening of your subsidiary.

Article by

John Carter

John Carter is a leading expert in the company formations industry. He has assisted countless business owners incorporate companies and is a font of knowledge when it comes to starting a company! If you found this blog interesting, please do share the love!

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