A corporation is an independent legal entity that is formed under state law. It has an existence that is separate from its shareholders and has many of the same rights and privileges as a person under the law. These include owning property and investments, such as shares in other businesses. There is no limit on how many businesses a corporation can own.
State statutes that authorize the formation of a corporation also provide it the authority to own property, make investments and control businesses. Thus, a corporation can own land, equipment and intangible assets such as stocks and bonds. This allows a corporation to function independently from its shareholders and pursue various business opportunities.
Among other types of assets, a corporation can hold ownership interests in other companies. Shares of stock and other types of ownership interests in businesses are considered personal property, which a corporation has the power to hold in its own name under the law. This is a key function of a corporation and benefits its shareholders by insulating them from liability that may arise from holding various assets.
A corporation also has the legal standing under the law to form companies that it can own in whole or in part, known as subsidiaries. This allows the corporation to branch off into other countries or operate businesses that may have special regulatory requirements. Subsidiaries can be branded with an identity separate from their parent company to reflect their individual purpose or can use the parent company brand so the existence of the subsidiary is not obvious to the public.
Read More: How to Find All Subsidiaries of a Corporation
Whether a corporation sets up a subordinate company or buys an existing company, there is no limitation on the number of business entities that a corporation can place under its ownership umbrella. It can own interests in other corporations or LLCs. A corporation may choose to utilize a parent/subsidiary structure to compartmentalize risk by placing risky ventures in separate subsidiaries so they don't jeopardize the entire corporation. This structure also allows different investors and financing structures for each of the corporation's different businesses.
Jeff Clements has been a certified public accountant and business consultant since 2002. He has also worked in private practice as an attorney. Clements founded a multi-strategy hedge fund and has served as its research director and portfolio manager since its inception. He holds a Juris Doctor, as well as a master's degree in accounting.