An entity that is controlled by another entity (known as the parent or parent company). The controlling entity/ parent can influence and direct the financial and operating policies of its subsidiary to the benefit and best interest of the parent. The controlled entity can be incorporated (full-fledged company) or unincorporated entity (a partnership). Control is typically defined as involving more than half of the voting rights assigned to the board managing the controlled entity. However, control may be manifested by power such as an agreement with other investors (whereby more than half of the voting rights are controlled through this agreement), or when an entity controls the financial and operating policies of another entity under an agreement to that effect, etc. (see more: control of subsidiaries).

A parent is required to prepare and present consolidated financial statements in which it consolidates its financials with those of its subsidiaries.