As a freelancer, you might find your client is actually a subsidiary. This is a common corporate structure where one company controls another.
What is Subsidiary?
A subsidiary is a separate legal company that is owned or controlled by a larger parent company. The parent typically holds a majority of the subsidiary's voting stock. This creates a distinct entity, even though it's part of a bigger corporate group.
Why is this important?
It's crucial because you contract with the subsidiary, not the parent company. This affects who is legally responsible for paying you and upholding the contract. Knowing this helps you understand your client's authority and financial backing.
How does it work?
You sign agreements and invoice the subsidiary directly. While the parent company may provide resources, your legal relationship is with the subsidiary entity. Payments and project approvals usually flow through its own management structure.
Pros and cons
Potential pros include working with a specialized brand backed by a larger corporation. Key cons involve complexity; if the subsidiary struggles, the parent may not be legally obligated to cover its debts to you, so assess its stability.
Conclusion
Recognizing a subsidiary helps you navigate corporate clients wisely. Always confirm which legal entity you are contracting with. This clarity protects your business and ensures smoother project execution.
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