Dr. D.B. “Doc” Rushing
© Copyright, 2020, 2022, Duncan Bryant Rushing
The Differences
between Divisions and Subsidiaries
of Corporations
The differences between a division and a subsidiary of a corporation are important – because they have important consequences and implications – because those differences include the nature of ownership, corporate governance, tax liability, civil and criminal liability, and governmental regulation.
A division does not have its own separate corporate identity or existence; instead it’s merely a part of its parent corporation. A division can have only one owner (its parent firm, of which it’s an integral and inseparable part).
On the other hand, a subsidiary is a separate corporation (with its own identity and existence) under its corporate owner or owners with its own corporate officers. A subsidiary can have not only its parent owner but also one or more other owners with minority ownership interests – as, for example, several Greyhound subsidiaries in the past under partial minority ownership by some of the railway firms.
A division is like an attached garage – a garage attached to a house – or a garage inside a basement – whereas a subsidiary is like a garage connected to a house by a breezeway or a covered walkway. A division is an integral part of a corporation, just as an attached garage is an integral part of a house, and a subsidiary is a separate corporation connected to its parent corporation, just as a connected garage is a separate structure connected to a house.
During the early years, starting in 1926, the Motor Transit Corporation and (later) The Greyhound Corporation were holding companies (rather than operating companies), which owned a growing multitude of subsidiary operating companies – until 1936, when the Congress of the US passed (and President Franklin Delano Roosevelt signed) the infamous Revenue Act of 1936, which caused or forced a simplification of the complicated corporate structures throughout the public-utility industries (including the transport industries).
On 01 January 1936, in anticipation of the new law, The Greyhound Corporation converted the Eastern Greyhound Lines of New England (the EGL of New England) from a subsidiary to the first Greyhound division. The parent firm did so by merging the EGL of New England and its assets into itself, then it dissolved the empty subsidiary corporation.
Incidentally, that action took the first step toward converting The Greyhound Corporation from a holding company (one which owned the operating subsidiaries) to an operating company (one which itself, through its divisions, operated the coaches and the facilities) – with its own ICC-MC number (1515). [Later Greyhound kept and continued using also the MC number 1511, which one of its other subsidiaries had obtained from the ICC.]
Changes in the federal laws soon allowed transport companies to return to the use of subsidiary corporations – but only as subsidiaries of operating corporations (rather than as subsidiaries of holding corporations); however, Greyhound continued using mostly divisions, although it did use also a few new subsidiaries.
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Posted at 21:38 EDT, Saturday, 04 June 2022.