How to Form a Subsidiary Corporation in Florida

By Terry Masters

A subsidiary corporation is a regular corporation whereby a parent corporation holds at least a majority of its corporate shares. Florida law allows one corporation to form and incorporate another with permission of the parent's corporation's board of directors. The incorporation process is the same as when an individual starts a new corporation. A parent company simply needs to issue a majority of the initial authorized shares to itself to make the new corporation a subsidiary. In practice, however, the parent corporation will typically want to place restrictive language in the subsidiary's articles of incorporation to maintain constructive control over the entity through the composition of its board of directors.

A subsidiary corporation is a regular corporation whereby a parent corporation holds at least a majority of its corporate shares. Florida law allows one corporation to form and incorporate another with permission of the parent's corporation's board of directors. The incorporation process is the same as when an individual starts a new corporation. A parent company simply needs to issue a majority of the initial authorized shares to itself to make the new corporation a subsidiary. In practice, however, the parent corporation will typically want to place restrictive language in the subsidiary's articles of incorporation to maintain constructive control over the entity through the composition of its board of directors.

Step 1

Hold a meeting of the board of directors. Vote to authorize the formation of a subsidiary corporation. This vote is a valid authorization, as long as the bylaws of the corporation does not prohibit the formation of a subsidiary or require a majority vote of shareholders to proceed. If the bylaws require consent of the shareholders to form a subsidiary, vote to present the issue at the next shareholder's meeting. All votes should be recorded in the meeting minutes and filed with the corporate records.

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Step 2

Check the availability of the name you want to use for the subsidiary. Florida law requires each business entity to use a name that is distinguishable from the names of other businesses operating in the state. Go to the "Document Searches" page of the division of corporations section of the Florida Department of State website. Search the state business entity database using the "Inquire by Name" link under "Corporations, Trademarks, Limited Partnerships, & Limited Liability Companies." This database contains information for every active business in the state. If the name you want to use does not come up in a name search, it is most likely available for use.

Step 3

Designate a registered agent for service of process. This can be any individual or entity with a physical street address in the state that will accept court summonses and government correspondence on behalf of the corporation. The parent company can serve as the subsidiary's registered agent, provided it is registered to do business in Florida and has a physical office in the state.

Step 4

Download an articles of incorporation template. You are not required to use this state-sanctioned form, but it is the easiest way to ensure that the state accepts your filing. You have the option of preparing your articles from scratch and including any provision that is not prohibited by law. Go to the forms section of the website and click on the "Florida Corporation Forms (Profit and NonProfit)" link. Select "Profit Articles of Incorporation" to download the correct form.

Step 5

Complete the articles of incorporation form as indicated. Florida law requires that the articles include certain information including the corporate name, office and purpose for existing, the initial number of shares authorized, the names and addresses of the initial officers or directors, the incorporator and the registered agent. An officer or director of the parent can act as the subsidiary's incorporator or an authorized third party, such as an attorney, can perform the task. The initial board of directors should be appointed by the parent and selected to ensure the parent retains as much operational control as it wants. The subsidiary's board can share members of the parent's board; however, the directors and officers of the subsidiary should be somewhat different from those of the parent.

Step 6

Add provisions to the articles that enable the parent to control the subsidiary. The parent corporation should add a restriction to the subsidiary's articles that reserves board of director appointments to the parent corporation and a restriction that prohibits changes to the bylaws without the parent corporation's approval. These two restrictions, along with properly crafted bylaws, enable the parent to control the subsidiary's operations, if it so desires.

Step 7

File the articles of incorporation with the department of state. Florida uses an electronic filing system. Access the "E-Filing Services" menu at the top of the department of state website. Select "FL Profit Articles of Incorporation." Accept the terms of service and click on the button to "Add Filing & Pay Fee." Upload the document and submit. Alternatively, you can submit your articles by mail. Send the original and one copy to the Department of State, Division of Corporations Corporate Filings, P.O. Box 6327, Tallahassee, FL 32314. Make your check payable to the Florida Department of State. Your subsidiary comes into existence once the state accepts your paperwork for filing.

Step 8

Capitalize the subsidiary in exchange for stock in the company. Transfer cash or assets to the name of the subsidiary as the parent's initial capital contribution. This contribution can acquire all of the subsidiary's authorized shares or just a majority.

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How to Create a New Company or Subsidiary of an Existing Company

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