parentcompany

A parent company, or parent, is a company that has control over one or more subsidiary companies. Control is usually obtained by owning a majority of voting shares or by appointing a majority of the subsidiary’s board of directors, enabling the parent to direct the policies and operations of the subsidiary. A parent may itself be an operating business or primarily a holding company that owns other firms.

In financial reporting, parent companies prepare consolidated financial statements that combine the assets, liabilities, income, and cash flows of their subsidiaries. Intercompany transactions and balances are eliminated in consolidation, and any subsidiaries not wholly owned are reflected with a non-controlling (minority) interest.

There are two common forms of parent structures. A holding company exists mainly to own shares of other companies and exert control, while an operating parent conducts its own business activities and may own subsidiaries that operate in related or unrelated fields. A corporate group can have multiple levels of ownership, with an ultimate parent at the top and intermediate parents beneath it.

Advantages of being part of a corporate group include centralized strategic direction, potential access to capital, economies of scale, and risk management through diversification. Drawbacks can include increased regulatory and governance complexity, higher compliance costs, possible contagion of problems across the group, and less operational transparency at the subsidiary level.

Examples of parent companies include Alphabet Inc., which controls Google and other units, and Berkshire Hathaway, a diversified holding company. The specific rights and responsibilities of a parent are shaped by jurisdictional laws and the group’s internal governance framework.