Legal Documents Needed to Create a Subsidiary

Creating a subsidiary can facilitate the expansion of a company's goals.

A subsidiary is a business that is controlled by another business or "parent" company. A company may choose to set up a subsidiary if it is expanding the mission or product line of the company and wants to take advantage of the legal and tax benefits of a subsidiary. Considerable planning and the filing of some legal documents is required when setting up a subsidiary.

Business Planning

Just as any company would do to create a business plan, it is a good idea to sit down with all parties involved and collectively develop a business plan for the new subsidiary. Having this document as your guide will facilitate the filing of all the legal documents for the subsidiary in a clear and concise manner. This first step will give the parent company a "leg up" when launching the new subsidiary.

Federal Tax Identification Number

File for a Federal Tax Identification Number, also known as an EIN or Employer Identification Number. Filing for this identification is free and takes a few short minutes using the online form at the Internal Revenue Service website. Information to have available is the type of business you are filing for, the name of the business's registered agent or director, the business address and a brief description of what the business will do.

DUNS Number

A DUNS, or Dun & Bradstreet ID number, is an international business identification number. This is also a free registration and can be accomplished with a phone call. Prior to calling have the following information at your fingertips: the company's legal name, address, name of contact person, line of business and number of employees of the new subsidiary. Call D&B, Monday through Friday, 7:00 a.m. until 8:00 p.m. (CST) at 1-866-705-5711. The call will take approximately five to ten minutes.

Bylaws

Bylaws must be drafted for the new subsidiary. A revised version of the company's current bylaws is often used. Bylaws define a company's structure, how the company will be governed and descriptions of the duties of the company's leadership and employees. A company may seek the advice of an attorney to draft bylaws.

Articles of Incorporation or Organization

All states require that businesses file articles of incorporation or articles of organization. The title varies from state to state, as does the filing fee. Many states have an online filing feature that allows you to fill out the forms via the Internet. This is a simple form that will take approximately 30 minutes to complete and will ask for the same types of information you have already used to file for the EIN and DUNS numbers. You will need to attach a copy of the subsidiary's bylaws to the form when filing.

References

• Journal of Accountancy: Is a Subsidiary in Your Future?
• IRS.gov: EIN Assistant
• Dun & Bradstreet: D-U-N-S Request by Phone

Resources

• Green Party of California: What Are Bylaws?