what are affiliated companies 
companies are affiliated when one company is a minority shareholder of another in most cases the parent company will own less than a 50 interest in its affiliated company two companies may also be affiliated if they are controlled by a separate third party in the business world affiliated companies are often simply called affiliates the term is sometimes used to refer to companies that are related to each other in some way for example bank of america has many different affiliated companies including bank of america u s trust landsafe balboa and merrill lynch companies may be affiliated with one another to get into a new market to maintain separate brand identities to raise capital without affecting the parent or other companies and to save on taxes in most cases affiliates are associates or associated companies which describes an organization whose parent has a minority stake in it understanding affiliated companiesthere are several ways that companies can become affiliated a company may decide to buy out or take over another one or it may decide to spin off a portion of its operations into a new affiliate altogether in either case the parent company generally keeps its operations separate from its affiliates since the parent company has a minority ownership its liability is limited and the two companies keep separate management teams affiliates are a common way for parent businesses to enter foreign markets while keeping a minority interest in a business this is especially important if the parent wants to shake off its majority stake in the affiliate there is no single bright line test to determine if one company is affiliated with another in fact the criteria for affiliation changes from country to country state to state and even between regulatory bodies for instance companies considered affiliates by the internal revenue service irs may not be considered affiliated by the securities and exchange commission sec affiliates vs subsidiariesan affiliate is different from a subsidiary of which the parent owns more than 50 in a subsidiary the parent is a majority shareholder which gives the parent company s management and shareholders voting rights subsidiary financials may also appear on the parent company s financial sheets but subsidiaries remain separate legal entities from their parents meaning they are liable for their own taxes liabilities and governance they are also responsible for following the laws and regulations where they are headquartered especially if they operate in a different jurisdiction from the parent company an example of a subsidiary is the relationship between the walt disney co and sports network espn disney owns an 80 interest in espn making it a majority shareholder espn is its subsidiary in ecommerce an affiliate refers to a company that sells the products of another merchant on its website sec rules surrounding affiliatessecurities markets around the world have rules that concern affiliates of the businesses they regulate here again these are complex rules that need to be analyzed by local experts on a case by case basis examples of rules enforced by the sec include tax consequences of affiliatesin nearly all jurisdictions there are important tax consequences for affiliated companies in general tax credits and deductions are limited to one affiliate in a group or a ceiling is imposed on the tax benefits that affiliates may reap under certain programs determining whether companies in a group are affiliates subsidiaries or associates is done through a case by case analysis by local tax experts 