1, which only bears limited liability, but does not bear all liability to the parent company;
2. The subsidiary's report to the parent company is limited to production and business activities, and it is not necessary to report the overall situation to the head office;
3. The subsidiary is an independent legal person, and its income tax is levied independently. Subsidiaries can enjoy various preferential policies of new enterprises;
4. It is much more flexible to hand over the profits of subsidiaries to the parent company, which means that the investment income and capital gains of the parent company can stay in the subsidiaries or be handed in when the tax burden is light, thus obtaining additional tax benefits.
5. The establishment of subsidiaries by an enterprise group can greatly develop the business areas that need to be developed in the long-term strategy of the group company, make the whole group stronger and bigger in these areas, and thus enhance the core competitiveness of the group. At the same time, by establishing the independent legal person status of the subsidiary, the operating risks of the subsidiary can be effectively limited to a certain range, and the group company only bears the risks within the scope of capital contribution, and will not suffer greater losses because of the mistakes in the operation of the subsidiary, and will not infringe on the interests of other business departments and other subsidiaries of the group company.
6. Through its own operation and efforts, subsidiaries form intangible assets such as goodwill and brand in the business field, which is helpful to enhance the overall image of enterprise groups.
Second, shortcomings.
1. Because it is an independent legal person, no matter whether it is a loss or a profit, the subsidiary cannot directly offset or make up for the profit and loss of the parent company;
2. The parent company is not allowed to deduct the profits or dividends paid by the subsidiary to the parent company and the management fees charged by the parent company to the subsidiary before tax, that is, all taxes are levied;
3, the transfer of assets of the parent company and subsidiaries, all need to pay taxes;
4. Related transactions between the parent company and its subsidiaries are not easy to handle, and cannot be handled as internal transactions, and statements cannot be consolidated according to the mode of the head office and subsidiaries.
5. Because the group company and its subsidiaries belong to the same enterprise group on the one hand, they must obey the strategic planning and interest objectives of the whole enterprise group; On the other hand, as independent legal persons, the parent company and subsidiaries in enterprise groups should pursue the maximization of their own interests. When the subsidiary is not a wholly-owned company of the group company, its pursuit of maximizing its own interests may affect the overall interests of the parent company. Even a wholly-owned subsidiary, as an independent legal person, its top decision-maker is sometimes forced to adapt to the needs of assessment mechanism and other factors when making decisions. They set their own business development goals based on the standards of subsidiaries and around the assessment indicators of parent companies. This pursuit is sometimes inconsistent with the interests of the whole group. In this way, under the parent-subsidiary model, there is bound to be a contradiction between the interests and goals of the enterprise group as a whole and those of individual independent legal persons of member enterprises, which is also reflected in the choice of financing methods of the parent-subsidiary company of the enterprise group.
Legal basis: People's Republic of China (PRC) Company Law.
Article 6 To establish a company, it shall apply to the company registration authority for registration of establishment according to law. Those that meet the conditions for establishment as stipulated in this Law shall be registered as limited liability companies or joint stock limited companies respectively by the company registration authority; Those who do not meet the conditions for establishment as stipulated in this Law shall not be registered as a limited liability company or a joint stock limited company.
Where laws and administrative regulations stipulate that the establishment of a company must be approved, the approval procedures shall be handled according to law before the company is registered.
The public may apply to the company registration authority to inquire about the registered items of the company, and the company registration authority shall provide inquiry services.
Article 7 A company established according to law shall be issued a business license by the company registration authority. The date of issuance of the business license of the company is the date of establishment of the company.
The company's business license shall specify the company's name, domicile, registered capital, business scope, name of legal representative and other matters.
Where the matters recorded in the company's business license change, the company shall register the change according to law, and the company registration authority shall issue a new business license.
Article 8 A limited liability company established in accordance with this Law must indicate the words limited liability company or limited company in its name.
A joint stock limited company established in accordance with this law must indicate the words joint stock limited company or joint stock company in its name.