Why Do Entrepreneurs Establish Wholly Owned Subsidiaries?
Entrepreneurs and business owners establish wholly owned subsidiaries for several reasons:
1. Market Expansion: It allows businesses to enter new markets while mitigating risks. The parent company can leverage the subsidiary to understand and adapt to local market conditions. 2. Resource Allocation: It enables better resource allocation and management. Resources can be distributed more efficiently between the parent company and the subsidiary. 3. Risk Management: By operating as a separate legal entity, the subsidiary can limit the legal and financial liabilities of the parent company. 4. Brand and Product Diversification: It allows entrepreneurs to diversify their brand and products without diluting the core brand of the parent company. 5. Strategic Control: Entrepreneurs can maintain strategic control and ensure that the subsidiary’s goals are aligned with the parent company's long-term objectives.