Legal Question in Business Law in California

Re: Subsidiary Corporation

There are both wholly-owned subsidiaries and less than wholly-owned subsidiaries. I think the classic definition of a subsidiary is that there is a parent corporation with a sufficient stock interest in the supposed subsidiary that it can effectively control it. In one sense, it would require the parent to own a majority, i.e. 50.00001% or so, of the stock. However, if one corporation owns 40%, and 6,000 other unrelated persons each own 1/100%, there is probably an effective parent-subsidiary relationship despite lack of assured control in a mathematical sense.

The IRS has certain standards, such as (if memory serves and the law hasn't changed) if the parent owns at least 80% of the subsidiary, they may file a consolidated tax return.

So, I think the answer you're looking for is that a subsidiary can have, and often does have, an "outside" interest of shareholders other than the parent.

Now, here's another distinction that needs to be made - that between parent and subsidiary, on the one hand, and sibling or sister corporations. If A, B, C, D and E are investors, and all five of them own most of Corporation X and Corporation Y (although perhaps in varying proprtions and with some outside interests as well), X and Y are sister corporations, but neither is a subsidiary of the other. On the other hand, if investors A, B, C and D own Corporation X and Corporation X and investor E own Corporation Y, X is a subsidiary of Y (assuming relatively equal percentages of ownership all around).

Sorry, I don't know any attorneys in Bakersfield that practice in this area. I used to know some bannruptcy guys and some politicians and lobbyists who were lawyers, connected with Kern County governmant and local transit agencies.