what is an affiliate 
affiliate is used primarily to describe a business relationship wherein one company owns less than a majority stake in the other company s stock affiliations can also describe a type of relationship in which at least two different companies are subsidiaries of the same larger parent company affiliate is also commonly used in the retail sector in this case one company becomes affiliated with another in order to sell its products or services earning a commission for doing so this term is now used widely in partnerships among online companies in which the affiliate supports another company by channeling internet traffic and e sales understanding affiliatesthere are several definitions of the term affiliate in the corporate securities and capital markets in the first an affiliate is a company that is related to another the affiliate is generally subordinate to the other and has a minority stake i e less than 50 in the affiliate in some cases an affiliate may be owned by a third company an affiliate is thus determined by the degree of ownership a parent company holds in another for example if big corporation owns 40 of mid corporation s common stock and 75 of tiny corporation then mid and big are affiliates while tiny is a subsidiary of big mid and tiny may also refer to one another as affiliates note that for the purposes of filing consolidated tax returns irs regulations state a parent company must possess at least 80 of a company s voting stock to be considered affiliated 1in retail and particularly in e commerce a company that sells other merchants products for a commission is an affiliate company merchandise is ordered from the primary company but the sale is transacted at the affiliate s site amazon and ebay are examples of e commerce affiliates a multinational company may set up affiliates to break into international markets while protecting the parent company s name in case the affiliate fails or the parent company is not viewed favorably due to its foreign origin understanding the differences between affiliates and other company arrangements is important in covering debts and other legal obligations companies can become affiliated through mergers takeovers or spinoffs other types of affiliatesaffiliates can be found all around the business world in the corporate securities and capital markets executive officers directors large stockholders subsidiaries parent entities and sister companies are affiliates of other companies two entities may be affiliates if one owns less than a majority of voting stock in the other for instance bank of america has a number of different affiliates around the world including merrill lynch 2affiliation is defined in finance in a loan agreement as an entity other than a subsidiary directly or indirectly controlling being controlled by or under common control with an entity in commerce two parties are affiliated if either can control the other or if a third party controls both affiliates have more legal requirements and prohibitions than other company arrangements to safeguard against insider trading an affiliate network is a group of associated companies that offer compatible or complementary products and will often pass leads to each other they may offer cross promotional deals encouraging clients who have utilized their services to look into the services offered by an affiliate in banking affiliate banks are popular for underwriting securities and entering foreign markets where other banks do not have direct access affiliates vs subsidiariesunlike an affiliate a subsidiary s majority shareholder is the parent company as the majority shareholder the parent company owns more than 50 of the subsidiary and has a controlling stake the parent thus has a great deal of control over the subsidiary and is allowed to make important decisions such as the hiring and firing of executives and the appointment of directors on the board 