Which of the following is true of a subsidiary?
A) A subsidiary is used to operate a parent company's holding company.
B) A subsidiary does not actually conduct business; rather, it functions as a foreign contact point.
C) A subsidiary insulates the parent company from unlimited liability.
D) A subsidiary is a part of the parent company and is not separately incorporated.

Question

Quizplus · Accepted Answer

A subsidiary is a separate legal entity from the parent company, which insulates the parent company from unlimited liability. This means that the subsidiary can be held liable for its own debts and obligations, without affecting the financial health of the parent company. A subsidiary does conduct business on its own, and may operate in a foreign country, but this is not the primary purpose of a subsidiary. A subsidiary can be separately incorporated, or can be a part of the parent company's legal structure, depending on how it is set up.

Which of the Following Is True of a Subsidiary