Branch vs. Subsidiary: What's the Difference?
Edited by Huma Saeed || By Sumera Saeed || Updated on October 21, 2023
A branch is an extension or division of a company in a particular location, while a subsidiary is a separate legal entity controlled by a parent company.
Key Differences
A branch, in the corporate sense, refers to a division or extension of the main company. It operates under the same legal entity as the main company and doesn't have a separate legal standing. The subsidiary, on the other hand, is a distinct legal entity, albeit one that's controlled by a parent company.
Sumera Saeed
Oct 21, 2023
When businesses expand, they often set up branches in new locations. These branches operate under the same name and business ethos as the main company. Subsidiaries, conversely, might function under a different name, and while they align with the parent company's ethos, they can also have their unique characteristics.
Sumera Saeed
Oct 21, 2023
Liabilities and responsibilities differ between branches and subsidiaries. Since a branch isn't a separate legal entity, its liabilities are directly the liabilities of the parent company. A subsidiary, being its separate entity, typically bears its liabilities unless explicitly guaranteed by the parent company.
Sumera Saeed
Oct 21, 2023
From a taxation perspective, branches and subsidiaries might be treated differently. A branch's income is usually taxed in conjunction with the parent company. Subsidiaries are taxed separately, based on the jurisdiction they operate in and their income.
Harlon Moss
Oct 21, 2023
Management structures can also differ. Branches are generally overseen by managers appointed by the parent company and follow the policies set by the main office. Subsidiaries have their management teams, and while they're accountable to the parent company, they might have a degree of autonomy in decision-making.
Harlon Moss
Oct 21, 2023
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Comparison Chart
Legal Entity
Not a separate legal entity; part of the main company
A distinct legal entity controlled by a parent company
Sumera Saeed
Oct 21, 2023
Liabilities
Liabilities are those of the parent company
Has its own liabilities unless guaranteed by parent company
Sumera Saeed
Oct 21, 2023
Name
Usually operates under the parent company's name
Can operate under a different name
Sumera Saeed
Oct 21, 2023
Management
Directly overseen by the parent company's appointed managers
Can have its management, with some autonomy
Aimie Carlson
Oct 21, 2023
Taxation
Income typically taxed with the parent company's income
Taxed separately based on its jurisdiction and income
Sara Rehman
Oct 21, 2023
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Branch and Subsidiary Definitions
Branch
A division of a company operating in a specific location.
The tech company has a branch in Silicon Valley.
Aimie Carlson
Oct 21, 2023
Subsidiary
A company controlled by another, called the parent company.
TechCorp's latest acquisition became its most profitable subsidiary.
Huma Saeed
Oct 21, 2023
Branch
An outpost of the central business.
The fast-food chain set up a branch in the mall.
Janet White
Oct 21, 2023
Subsidiary
A separate legal entity from the parent company.
The subsidiary operates under its laws and regulations.
Harlon Moss
Oct 21, 2023
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Subsidiary
Can function under a different name than its parent.
Though owned by MegaCorp, the subsidiary kept its original branding.
Janet White
Oct 21, 2023
Branch
Part of the same legal entity as the parent company.
The branch's assets are considered assets of the main company.
Sumera Saeed
Oct 21, 2023
Subsidiary
Offers some degree of operational autonomy.
The subsidiary introduced policies tailored to its regional market.
Harlon Moss
Oct 21, 2023
Branch
Operates under the parent company's governance.
The branch follows guidelines set by the headquarters.
Sumera Saeed
Oct 21, 2023
Subsidiary
A company where the majority stake is owned by another.
The media giant holds an 80% stake in the subsidiary.
Sumera Saeed
Oct 21, 2023
Branch
A secondary woody stem or limb growing from the trunk or main stem of a tree or shrub or from another secondary limb.
Sumera Saeed
Sep 25, 2019
Branch
A lateral division or subdivision of certain other plant parts, such as a root or flower cluster.
Sumera Saeed
Sep 25, 2019
FAQs
What's the primary difference between a branch and subsidiary?
A branch is an extension of a company, while a subsidiary is a separate legal entity controlled by a parent company.
Sumera Saeed
Oct 21, 2023
Who bears the liabilities for a branch?
The parent company directly bears the liabilities of its branches.
Sumera Saeed
Oct 21, 2023
Can a subsidiary operate under a different name?
Yes, a subsidiary can have a different name than its parent company.
Huma Saeed
Oct 21, 2023
Can a subsidiary have its management team?
Yes, subsidiaries often have their management teams, though they report to the parent company.
Janet White
Oct 21, 2023
Is a branch taxed separately?
Generally, a branch's income is taxed in conjunction with the parent company.
Sumera Saeed
Oct 21, 2023
Can a branch become a subsidiary?
Yes, companies can restructure, converting branches into separate legal entities or subsidiaries.
Sumera Saeed
Oct 21, 2023
Can a company have both branches and subsidiaries?
Yes, many companies have a combination of branches and subsidiaries.
Sumera Saeed
Oct 21, 2023
Are there specific tax benefits to having a subsidiary?
Tax benefits depend on jurisdictions. In some cases, subsidiaries can offer tax advantages based on their location.
Sumera Saeed
Oct 21, 2023
Why might a company choose a branch over a subsidiary?
Branches can be easier to set up and manage directly under the parent company's oversight.
Sumera Saeed
Oct 21, 2023
Who makes decisions for a branch?
Decisions for a branch are typically made by managers appointed by and reporting to the parent company.
Janet White
Oct 21, 2023
How is a subsidiary formed?
A subsidiary can be formed through acquisition or by setting up a new company.
Janet White
Oct 21, 2023
Can a subsidiary be located in a different country?
Yes, many subsidiaries are established in different countries for various strategic reasons.
Sumera Saeed
Oct 21, 2023
How is the profit of a branch used?
The profits of a branch are typically funneled back to the parent company.
Sara Rehman
Oct 21, 2023
How are subsidiaries and branches reflected in financial statements?
Branches are integrated into the parent company's statements, while subsidiaries might be consolidated, depending on ownership percentage.
Harlon Moss
Oct 21, 2023
Can a subsidiary be larger than its parent company?
While uncommon, it's possible for a subsidiary to grow and become larger than its parent company.
Sumera Saeed
Oct 21, 2023
Can a subsidiary own another subsidiary?
Yes, it's possible for a subsidiary to have its own subsidiaries.
Harlon Moss
Oct 21, 2023
How is the performance of a branch measured?
Branch performance is usually evaluated based on its contributions to the parent company's goals and profitability.
Sumera Saeed
Oct 21, 2023
Does a branch have autonomy in operations?
Branches typically follow the guidelines and policies set by the parent company.
Janet White
Oct 21, 2023
What's the advantage of having a subsidiary over a branch?
Subsidiaries can offer legal and financial insulation, protecting the parent company from some liabilities.
Sumera Saeed
Oct 21, 2023
Are the employees of a branch and subsidiary considered the same?
Branch employees are directly the parent company's employees, while subsidiary employees work for the subsidiary.
Sara Rehman
Oct 21, 2023
About Author
Written by
Sumera SaeedSumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.
Edited by
Huma SaeedHuma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.
