when a parent company acquires a subsidiary by buying up that company s stock the acquisition is a qualified stock purchase for tax purposes moreover any losses by the subsidiary can be used to offset the profits of the parent company resulting in a lower tax liability 
sometimes a subsidiary can do things that the parent company cannot do on its own for example a non profit entity can create a for profit subsidiary in order to raise revenue while the subsidiary would be subject to federal income taxes the parent company would remain exempt tax exempt organizations can have for profit subsidiaries parent companies can use losses from one subsidiary to offset taxes on profits from another the parent company inherits the acquired company s clients and goodwill which would be hard to recreate from scratch running a subsidiary can be difficult if the acquired company has a different management culture acquiring another company can be expensive especially if other companies are competing for it risks may be higher if the subsidiary is located in a different jurisdiction subsidiary vs wholly owned subsidiarya subsidiary is a company whose stock is more than 50 owned by a parent company or a holding company that gives the parent company a controlling interest in the subsidiary s operations management and profits however the subsidiary still has financial obligations to its minority shareholders a wholly owned subsidiary is 100 owned by the parent company with no minority shareholders examples of wholly owned subsidiariesvolkswagen group is an example of a wholly owned subsidiary system the parent company wholly owns the automotive brands audi bentley porsche and lamborghini as well as volkswagen 2in addition marvel and lucasfilm are now wholly owned subsidiaries of the walt disney company 3