How to Create a Subsidiary Company
It’s definitely a good idea to set up a subsidiary of your main company. On contrary to the popular belief, setting up a subsidiary in the UK follows almost an identical process as that of a standard company. The following guide will teach the do’s and don’ts of establishing a subsidiary company without any tussles with the law:
The position must not be confounded with the function of a subsidiary company. A subsidiary company, by definition, is an entity that is owned either partially or completely by some other company. The company owning the subsidiary company is referred to as the Parent Company (also called Holding Company). However, the two differ from each other in some aspects.
Setting up Subsidiary
The subsidiary company could be entirely or partly owned by some other company. Technically speaking, a subsidiary is another company; therefore it must be registered as one.
While forming a company with a company formation expert, you can choose between corporate ownership structure and a person, thereby allowing you to establish a subsidiary company through some online formation software.
- At least one individual to submit required documentation and to assume the position of the Director for the subsidiary company (May be same as the one for parent company).
- Registered office address: Within the country where you are setting up the subsidiary in (UK in this case).
- Sole director: When registering as sole director, both residential and service address is required; however, only service address will be mentioned in the public records.
The key point to remember here is that in all the documentations submitted regarding shareholders, one will have both the individual director and the other company as “shareholder”. However, you cannot have the complete ownership of one company under another company.
After successful submission of documents, the decision from Companies House is provided to you within 24 hours.
Once done, you can sell one part to another company, give them to multiple owners or transform your subsidiary company in an independent company; just like any other private limited company.
The decision for choosing Subsidiary company
You must ponder about establishing a subsidiary company only if:
- You are working beyond the country: Most foreign companies will opt to set up a subsidiary company in the UK (if the parent company is based overseas). The advantages (both tax and administrative) are numerous.
- Multiple Businesses: For a formal separation of the different branches of the same business due to radical natures of the two.
- Team Differences: For a formal separation, sometimes companies create a subsidiary if there is a team working at another office on a different project, where the project is most probably not relevant to the business’ primary purpose.
Having talked about the pros and cons of establishing a subsidiary, the choice is totally yours. Sometimes, it may really not be necessary and may be even better to start a new company from the bottom, but when opening a subsidiary indeed, it’s better to seek the help of a professional agent to kick start the process.