Difference Between Division and Subsidiary

Division vs Subsidiary

A division is a part of a business entity. This means that a division, although it operates in a different name, is still a piece of the entity itself. On the other hand, a subsidiary is an entirely different company, a separate one, which is owned by another usually bigger entity. But in some cases, the parent company is a much smaller entity than that of the subsidiary company. In a more concrete analogy, you can say that a division is a part of the body, let us say hand, for instance, and while a subsidiary is the offspring with an entirely separate body but is still owned by the parent company.

Another difference between a subsidiary and a division is that the subsidiary can perform an entirely different operation from that of its parent company while a division cannot. If the company is into making cars, the division would most likely be a manufacturer of wheels or other car parts. In this case, this particular company may also have a subsidiary that is not related to car manufacturing cars at all. For example, a subsidiary company may have a cellular phone manufacturing entity, but the subsidiary does not always need to be something different from the business. Subsidiary companies can also operate on something that is related to the business of its parent company; it will not matter. Unlike in the case of a division, division operations have to be related to the operations of its parent company.

Furthermore, a division’s debts and all other obligations are the responsibility of the parent company. This means that the condition of a division, whether it is doing well or it is not, affects the parent company. On the other hand, the state of a subsidiary company in taxation and regulation does not affect the parent company. Even if the subsidiary company is experiencing a financial crisis, it does not necessarily mean the parent company will experience the same and vice versa. This is because the subsidiary company and parent company are legally two different companies, and they technically do not share the same system.

SUMMARY:

1.A division still operates as part of the parent company, although it has a different name, while a subsidiary is a totally separate company from the parent company.

2.A division’s operations should be related to the operations of the parent company while a subsidiary company’s operations need not to be in line with its parent company’s operations.

3.The condition of the division will greatly affect the parent company while the condition of a subsidiary will not have any effect on the parent company.

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