Creating Business Entities Relating To Internal Expansion

The following are quick rule of thumbs to know when having to understand the concept of creating business entities relating to internal expansion: 

• Transfer company creates subsidiary
• The company owns and controls subsidiary
• Company transfers assets and liabilities to entity that company created and controls
• That company with control owns majority ownership
• Company transfers assets and liabilities at book value
• Transferring company recognizes ownership interest to the book value of net assets
• If impaired assets, the transferring company should recognize an impairment loss, and transfer the asset to the new entity at the lower fair value
• Subsidiary will properly record assets and liabilities in the transfer, at book value, at time of the transfer