A subsidiary or subsidiary of a company, firm, corporation or liability company is an entity controlled by another entity called a parent or, in certain models, a holding company.[1]​.

The reason for this distinction is that a company alone cannot be a subsidiary of an organization. Only an entity representing a legal fiction as a separate entity can be a subsidiary. While individuals have the ability to act on their own initiative, a business entity can only act through its directors, officers and employees.

It is widely used to establish itself in new markets, where the parent company has not yet developed its activity.[2]​.

A subsidiary is a commercial company created according to the rules of the state where it is established with a capital contribution from another company, which is the one that owns a majority percentage of shares and therefore exercises control. Subsidiaries have their own legal personality, independent of the parent company.[3]​.

A subsidiary can also have subsidiaries, and these, in turn, can have their own subsidiaries. A parent company and all of its subsidiaries are called a group, although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership. When the subsidiary is not shared by two or more companies, it is called "wholly owned."

The subsidiary company can only act following the guidelines set by those responsible for its holding company, although for the purposes of regulation and payment of taxes they are considered independent entities from the parent company.[4]​.

Subsidiaries are separate entities, legally distinct for tax and regulatory purposes. For this reason they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. In contrast, an inoperative subsidiary company would exist on paper only (ie stock, bonds, articles of incorporation) and would use the stock of the holding company's identity.

Although the word "subsidiary" is often used as a synonym for branch - as is indeed its meaning in other languages ​​- in Spanish it does not have the same meaning, the latter being an entity (normally an office or point of sale) legally belonging to the company it represents. Therefore, unlike the subsidiary/parent company relationship, it would be correct to speak of a branch/headquarters relationship.[5]​.