When Should A STEM Business Consider Using A Subsidiary?

As STEM businesses grow, they often expand beyond their original product, technology or area of research. New technologies, regulated activities and higher-risk projects can all raise questions about whether those activities should sit within the existing company or be carried on through a separate subsidiary.

A subsidiary is a separate company owned or controlled by a parent company. Although part of the same group, it has its own legal identity and can own assets, enter into contracts and incur liabilities in its own name.

A subsidiary can be an effective way to separate different parts of a business, but it also brings additional cost, administration and governance requirements. The decision should therefore be driven by clear commercial objectives.