Branch vs. Subsidiary — What's the Difference?
By Urooj Arif & Fiza Rafique — Updated on April 22, 2024
A branch is an extension of a parent company that operates in a different location, sharing the same legal identity; a subsidiary is a separate legal entity controlled by a parent company, offering greater operational independence.
Difference Between Branch and Subsidiary
Table of Contents
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Key Differences
A branch acts as an operational arm of its parent company, located in a different geographical area but not legally distinct from the parent. This means that the branch’s financial and legal liabilities directly affect the parent company. In contrast, a subsidiary is a distinct legal entity, although it is owned by another company (parent). This legal separation allows the subsidiary to handle its liabilities, taxes, and regulations independently, potentially limiting financial risk to the parent.
While branches are often seen as mere extensions of the parent company, they do not have a separate legal status. They operate under the name and corporate structure of the parent, making their operations and finances directly tied to the main company. Subsidiaries, on the other hand, can have their own branding, management structures, and even different business focuses from their parent company, providing them a degree of operational flexibility not afforded to branches.
In terms of governance, the management of a branch is usually appointed by the parent company and is expected to follow the directives and policies of the parent closely. Subsidiaries, however, often have their own board of directors and management team, which allows them to make decisions that are best suited to their local circumstances, although the parent company typically retains significant influence or control.
Financially, a branch's assets and liabilities are recorded directly in the parent company’s balance sheet. Subsidiaries, while they might consolidate their financial results with their parent for reporting purposes, maintain their own separate accounting records. This distinction can influence how companies choose between setting up a branch or a subsidiary, depending on financial strategies and the need for financial independence or consolidation.
Regulatory treatment also differs significantly between branches and subsidiaries. As branches are not separate legal entities, they are often subject to the home country’s laws in addition to local regulations. Subsidiaries, by being separate entities, are primarily subject to the laws of the country in which they are established, which can be advantageous for regulatory, tax, and legal reasons.
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Comparison Chart
Legal Status
Not a separate legal entity
Separate legal entity
Financial Risk
Parent company liable
Limited liability for parent company
Management Control
Direct control by parent
Local board and management
Financial Records
Part of parent’s books
Separate accounting records
Regulatory Compliance
Subject to parent’s and local laws
Primarily subject to local laws
Compare with Definitions
Branch
A location or office of a company that is not the headquarters but operates under the headquarters' corporate identity.
The company opened a new branch in Tokyo to expand its market reach in Asia.
Subsidiary
A company controlled by another company through majority share ownership.
The multinational corporation has a subsidiary in nearly every continent to manage regional operations.
Branch
An offshoot of a tree; metaphorically used for divisions of a company.
The technology branch of the company is its fastest-growing sector.
Subsidiary
Less important; not primary.
Subsidiary issues were discussed once the main agenda was completed.
Branch
To diverge from the main part, often used in discussions of paths or decisions.
The river branches several miles near the delta.
Subsidiary
Serving to assist or supplement.
The training program is subsidiary to the broader education initiative.
Branch
A local section of a society or organization.
The local branch of the national wildlife charity holds monthly meetings.
Subsidiary
Dependent or conditional upon.
The deal is subsidiary to the board's approval.
Branch
A division within a larger organization or system, often related to government or academia.
The judicial branch is one of three branches of government.
Subsidiary
A secondary or subordinate part of a larger entity.
The company’s subsidiary focuses on renewable energy products.
Branch
A branch (UK: or UK: , US: ) or tree branch (sometimes referred to in botany as a ramus) is a woody structural member connected to but not part of the central trunk of a tree (or sometimes a shrub). Large branches are known as boughs and small branches are known as twigs.
Subsidiary
A subsidiary, subsidiary company or daughter company is a company owned or controlled by another company, which is called the parent company or holding company. Two subsidiaries that belong to the same parent company are called sister companies.
Branch
A part of a tree which grows out from the trunk or from a bough
Sophie was in the branches of a tree eating an apple
Subsidiary
Serving to assist or supplement; auxiliary.
Branch
(of a road or path) divide into one or more subdivisions
Follow this track south until it branches into two
Subsidiary
Secondary in importance; subordinate.
Branch
(of a tree or plant) bear or send out branches
This rose has a tendency to branch and spread at the top
The branching heads of large yellow daisies
Subsidiary
Of, relating to, or of the nature of a subsidy.
Branch
A secondary woody stem or limb growing from the trunk or main stem of a tree or shrub or from another secondary limb.
Subsidiary
One that is subsidiary to another.
Branch
A lateral division or subdivision of certain other plant parts, such as a root or flower cluster.
Subsidiary
A subsidiary company.
Branch
A secondary outgrowth or subdivision of a main axis, such as the tine of a deer's antlers.
Subsidiary
(Music) A theme subordinate to a main theme or subject.
Branch
(Anatomy) An offshoot or a division of the main portion of a structure, especially that of a nerve, blood vessel, or lymphatic vessel; a ramus.
Subsidiary
Auxiliary or supplemental.
Branch
An area of specialized skill or knowledge, especially academic or vocational, that is related to but separate from other areas
The judicial branch of government.
The branch of medicine called neurology.
Subsidiary
Secondary or subordinate.
A subsidiary stream
Branch
A division of a business or other organization.
Subsidiary
Of or relating to a subsidy.
Subsidiary payments to an ally
Branch
A division of a family, categorized by descent from a particular ancestor.
Subsidiary
A company owned by a parent company or a holding company, also called daughter company or sister company.
Branch
(Linguistics) A subdivision of a family of languages, such as the Germanic branch of Indo-European.
Subsidiary
(music) A subordinate theme.
Branch
A tributary of a river.
Subsidiary
One who aids or supplies; an assistant.
Branch
Chiefly Southern US See creek. See Note at run.
Subsidiary
Furnishing aid; assisting; auxiliary; helping; tributary; especially, aiding in an inferior position or capacity; as, a subsidiary stream.
Chief ruler and principal head everywhere, not suffragant and subsidiary.
They constituted a useful subsidiary testimony of another state of existence.
Branch
A divergent section of a river, especially near the mouth.
Subsidiary
Of or pertaining to a subsidy; constituting a subsidy; being a part of, or of the nature of, a subsidy; as, subsidiary payments to an ally.
George the Second relied on his subsidiary treaties.
Branch
(Mathematics) A part of a curve that is separated, as by discontinuities or extreme points.
Subsidiary
One who, or that which, contributes aid or additional supplies; an assistant; an auxiliary.
Branch
A sequence of program instructions to which the normal sequence of instructions relinquishes control, depending on the value of certain variables.
Subsidiary
An assistant subject to the authority or control of another
Branch
The instructions executed as the result of such a passing of control.
Subsidiary
A company that is completely controlled by another company
Branch
(Chemistry) A bifurcation in a linear chain of atoms, especially in an organic molecule where isomeric hydrocarbon groups can vary in the location and number of these bifurcations of the carbon chain.
Subsidiary
Relating to something that is added but is not essential;
An ancillary pump
An adjuvant discipline to forms of mysticism
The mind and emotions are auxilliary to each other
Branch
To put forth a branch or branches; spread by dividing.
Subsidiary
Functioning in a subsidiary or supporting capacity;
The main library and its auxiliary branches
Branch
To come forth as a branch or subdivision; develop or diverge from
An unpaved road that branches from the main road.
A theory that branches from an older system of ideas.
Branch
(Computers) To relinquish control to another set of instructions or another routine as a result of the presence of a branch.
Branch
To separate (something) into branches.
Branch
To embroider (something) with a design of foliage or flowers.
Branch
The woody part of a tree arising from the trunk and usually dividing.
Branch
Any of the parts of something that divides like the branch of a tree.
The branch of an antler, a chandelier, or a railway
Branch
A creek or stream which flows into a larger river.
Branch water
Branch
(geometry) One of the portions of a curve that extends outwards to an indefinitely great distance.
The branches of a hyperbola
Branch
A location of an organization with several locations.
Our main branch is downtown, and we have branches in all major suburbs.
Branch
A line of family descent, in distinction from some other line or lines from the same stock; any descendant in such a line.
The English branch of a family
Branch
(Mormonism) A local congregation of the LDS Church that is not large enough to form a ward; see Wikipedia article on ward in LDS church.
Branch
An area in business or of knowledge, research.
Branch
(nautical) A certificate given by Trinity House to a pilot qualified to take navigational control of a ship in British waters.
Branch
(computing) A sequence of code that is conditionally executed.
Branch
(computing) A group of related files in a source control system, including for example source code, build scripts, and media such as images.
Branch
(rail transport) A branch line.
Branch
(intransitive) To arise from the trunk or a larger branch of a tree.
Branch
(intransitive) To produce branches.
Branch
(ambitransitive) To (cause to) divide into separate parts or subdivisions.
Branch
To jump to a different location in a program, especially as the result of a conditional statement.
Branch
(transitive) To strip of branches.
Branch
To discipline (a union member) at a branch meeting.
Branch
A shoot or secondary stem growing from the main stem, or from a principal limb or bough of a tree or other plant.
Branch
Any division extending like a branch; any arm or part connected with the main body of thing; ramification; as, the branch of an antler; the branch of a chandelier; a branch of a river; a branch of a railway.
Most of the branches , or streams, were dried up.
Branch
Any member or part of a body or system; a distinct article; a section or subdivision; a department.
It is a branch and parcel of mine oath.
Branch
One of the portions of a curve that extends outwards to an indefinitely great distance; as, the branches of an hyperbola.
Branch
A line of family descent, in distinction from some other line or lines from the same stock; any descendant in such a line; as, the English branch of a family.
His father, a younger branch of the ancient stock.
Branch
A warrant or commission given to a pilot, authorizing him to pilot vessels in certain waters.
Branch
Diverging from, or tributary to, a main stock, line, way, theme, etc.; as, a branch vein; a branch road or line; a branch topic; a branch store.
Branch
To shoot or spread in branches; to separate into branches; to ramify.
Branch
To divide into separate parts or subdivision.
To branch out into a long disputation.
Branch
To divide as into branches; to make subordinate division in.
Branch
To adorn with needlework representing branches, flowers, or twigs.
The train whereof loose far behind her strayed,Branched with gold and pearl, most richly wrought.
Branch
An administrative division of some larger or more complex organization;
A branch of Congress
Branch
A division of a stem, or secondary stem arising from the main stem of a plant
Branch
A part of a forked or branching shape;
He broke off one of the branches
They took the south fork
Branch
A natural consequence of development
Branch
A stream or river connected to a larger one
Branch
Any projection that is thought to resemble an arm;
The arm of the record player
An arm of the sea
A branch of the sewer
Branch
Grow and send out branches or branch-like structures;
These plants ramify early and get to be very large
Branch
Divide into two or more branches so as to form a fork;
The road forks
Common Curiosities
What is a branch in business terms?
A branch is an office or location of a company operating under the same legal identity as the parent company, located in a different geographical area.
How does a subsidiary differ from a branch?
A subsidiary is a separate legal entity owned by a parent company, offering more operational and legal independence than a branch.
How is a subsidiary managed compared to a branch?
A subsidiary typically has its own management and board, allowing it to operate semi-independently, whereas a branch is directly managed by the parent company.
Is a branch liable for its own legal issues?
Since a branch is not a separate legal entity, its legal issues directly affect the parent company.
Can a subsidiary have a different business focus than its parent company?
Yes, subsidiaries can operate in different business areas or markets than their parent, allowing for diversification.
What are the financial implications of a subsidiary for the parent company?
A subsidiary maintains its own financial records and liabilities, which can limit the financial risk to the parent company.
Who controls the financial decisions of a subsidiary?
While the parent company has significant influence, financial decisions are often made by the subsidiary’s own management and board within the frameworks set by the parent.
Can a subsidiary be sold by its parent company?
Yes, a subsidiary can be sold to another company, as it is a separate legal entity.
What are the benefits of establishing a subsidiary?
Subsidiaries provide operational flexibility, limited financial risk, and are subject to the local laws, which can be advantageous for regulatory compliance.
What are the tax implications for a branch?
A branch’s earnings are usually taxable to the parent company, and it may face taxation in both the home and host country.
Can a branch conduct business independently of its parent company?
No, a branch operates as an integral part of the parent company and cannot conduct business as a separate entity.
How does the public perceive branches and subsidiaries?
Branches are often seen as direct extensions of the parent company, while subsidiaries may be viewed as more localized and independently operated entities.
What are the risks of operating a subsidiary?
While a subsidiary offers benefits like limited risk to the parent, it can still pose challenges such as management complexity and potential conflicts between local and parent company goals.
Why might a company choose to open a branch instead of a subsidiary?
Opening a branch can be simpler and may be preferred for closely controlled operations without the need for a separate legal entity.
What is the role of a branch manager?
A branch manager oversees the operations at a branch level, ensuring adherence to parent company policies and achieving business objectives.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Co-written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
