A sister company is a type of business relationship in which the same parent company owns two separate companies. These two companies may share resources, personnel, and/or profits, but they remain separate legal entities. Sister companies are often used to bringing a product or service to the market faster than if the parent company had to do it alone. But the parent company owns a controlling stake in each sister company.
Comparison
A sister company is different from a subsidiary, which is also owned by a parent company but operates as a separate legal entity within the parent company’s corporate structure. Subsidiaries are typically smaller companies that are owned by larger companies. Sister companies, however, generally are of equal size and may even have the same products and services.
Advantages
A sister company’s advantage is the ability to bring a product or service to market faster than if the parent company had to do it alone. This is because the sister companies can share resources, personnel, and profits. Sister companies can also reduce costs by sharing equipment, facilities, and other overhead expenses. Finally, sister companies can help the parent company diversify its portfolio and reduce its risk by investing in different types of businesses.
