How To Create A Subsidiary Company
Setting up a subsidiary may be a good idea for your company. In the UK, it is not complicated to set one up. It is almost the same process as setting up a normal company. This guide teaches you how you can go about setting up a subsidiary company without getting into legal trouble.
What is a Subsidiary Company?
There is some confusion over the position of the subsidiary company and what it is for. A subsidiary company is either wholly owned or part-owned by another company. The company that owns it is called a parent company or holding company. A holding company is slightly different from a parent company.
How To Set Up a Subsidiary Company
A subsidiary company may either be partly owned or entirely owned by another company, but it is not the same as simply trading under a different name. The subsidiary is technically a wholly separate company, and so it has to be incorporated as such.
When forming your company, you can easily choose to have a corporate ownership structure as opposed to a personal one. You need at least one person to actually submit the documentation and to act as a director for the new company. This may be the same person as the director of the parent company.
You also need to have a registered office address. This address must be in the country in which you are setting up the subsidiary – the UK in this case.
To set up a subsidiary company, you will only need a single director. The requirement to also have a company secretary was waived several years ago. The main restriction is that the director cannot then also act as the company secretary. When you register as a director, you will need to give both your home address and a ‘service address’. Only the service address appears in public records.
The key thing is that in the documentation you submit regarding shareholders, you must have both an individual as a director and another company as a shareholder. You are not allowed to have an entire company owned by another company.
Once you have submitted the documents, you get a decision within 24 hours from Companies House.
Like any other private limited company, you can make changes to your subsidiary after its incorporation. You can sell a part of the company to another company in order to give it multiple owners, or you could transform the subsidiary company into a whole standalone company.
Why Should You Setup a Subsidiary Company?
A subsidiary company is only needed in a few scenarios. You will need to think about setting up a subsidiary company if:
You are Operating Overseas – Foreign companies always opt to setup a subsidiary company in the UK when their main company is based overseas. There are tax and administrative advantages to doing this.
Different Types of Businesses – Sometimes you may have different arms of your business that are so different that they need to be formally separated from one another.
Team Differences – Some companies will create a subsidiary if they have a team working on a different project at another office.
Opening a subsidiary isn’t a decision to be taken lightly. It is not always necessary and it may be easier to open a new company from scratch. You have to make this decision yourself – and it may be better to employ a company formations agent to help with the formation of your subsidiary.