Setting up a subsidiary for your company is easier than you may think. In some cases, this would be a very smart move for you to make. This article explains to you in detail what a subsidiary is, in which situations a company might need one and how to go about setting up a company in the UK.
What Is A Subsidiary?
There’s a lot of confusion in regard to this legal entity. Briefly put, a subsidiary is a company that’s either partially or totally owned by another company. The company that owns it is the so-called holding or parent company. Keep in mind, though, that there are a few differences between a parent company and a holding company.
How To Set Up A Subsidiary
A subsidiary company may be totally or partially owned by another company, but from a technical standpoint, it is a totally different legal entity, and therefore you need to incorporate it as one.
When choosing Your Company Formations to set up a new company, you can easily opt for a corporate ownership structure rather than an individual one. Our online formation software tool allows you to set up a subsidiary in a seamless and hassle-free manner. Keep in mind, though, that you’ll need at least one person to fulfill the director role for the new company. This person can be the director of the parent company.
In addition, you’ll need a registered office address. This address has to be in the country where you intend to set up your subsidiary, whether this is the UK or any other country for that matter.
Setting up one of these companies requires you to appoint only one sole director. The requirement of appointing a company secretary was waived a while ago. Nonetheless, should you want to appoint one, keep in mind that the sole director can’t act as a company secretary? When registering as a sole director, you’ll need to provide two addresses, your residential and your service one. The public records of your company will only disclose your service address.
The main point is that your newly formed company will have an individual person and a company as shareholders. You can’t have an entire company owned solely by another one.
Once you submit your application and all required documents, you’ll receive your decision from Companies House within one working day.
Can I Make Changes After Incorporation?
Yes, making changes after the incorporation of your subsidiary is possible. You can sell some shares to another company or to multiple owners, or you could change it to become a company that stands on its own.
Who Needs A Subsidiary Company?
There are a few scenarios that may call for setting up a subsidiary.
You Are Operating Overseas – Companies that are based overseas but intend to operate in the UK choose to set up a subsidiary, because of the tax and administrative advantages they will enjoy.
You Conduct Two Different Businesses – If a part of your business is radically different than the rest, you may want to formally separate the two.
There Are Team Differences – If you have a team working on a separate project at a separate office, you may want to set up a subsidiary for this part of your business, in order to create a formal separation between the two.
Setting up a subsidiary is a decision that requires a lot of thinking. You should only do this in one of the above-mentioned situations. If a subsidiary doesn’t bring you any benefits, you may be better off setting up a different company from the scratch. Before making this decision, take time to put all advantages and drawbacks on paper, compare the two, and see which of these scenarios would bring you the most benefits.