Organizational Charts

Example

Organizational Charts

Example

• Rectangle: a corporation, i.e., a separate legal entity; a corporation has at least one shareholder

• Triangle: a partnership, a specific form of corporation (also a separate legal entity) with at least two partners; a key difference to a corporation/rectangle is that partnerships are typically not taxed but income is passed-trough to the partners and taxed there

• Person: a natural person (like you and me), may hold equity/shares in a corporation or be a partner in a partnership

• Ellipse: a branch, think of an office/establishment that a corporation establishes somewhere (e.g., abroad) without creating a separate legal entity

Organizational Charts

Example

How to read the chart/our example?

• HQCo is a corporate entity, for instance a BV (in NL), an AG (in DE) or an Inc (in US); HQCo might be a publicly traded company (often in US), i.e., its shares are traded on a stock market (like NYSE)

• HQCo has three shareholders, all are natural persons (like you and me, assume all hold <50% of the shares in HQCo); HQCo could also have a another corporation as (minority) shareholder; often pension funds (a special form of entity) are shareholders of publicly traded firms

Organizational Charts

Example

How to read the chart/our example? cont’d

• SubCo is a subsidiary: it is a corporate entity and 100% of its shares are owned by HQCo; a subsidiary is often called as such when a parent company owns >50% in the firm’s shares: the parent has a controlling interest in the subsidiary’s equity

• SiSCo is also a subsidiary of HQCo, it is referred to as SisCo because it is a “sister”/sibling of SubCo (i.e., SubCo is also a sister company)

• SubCo owns 100% of the shares in SubCo2; lines in this chart indicate ownership relationships (\(=\) or \(<\) 100% ownership-indications are suppressed here); HQCo is the global ultimate owner of SubCo2 (and all other subsidiaries)

Organizational Charts

Example

How to read the chart/our example? cont’d

• Part is a partnership with two partners: SisCo and HQCo, it might well be that HQCo holds up to 99.9% of the interest in Part and SisCo only holds .1% (or vice versa or, for instance, 50:50)

• Branch is an establishment of HQCo (e.g., a business unit); it carries out business in the name of HQCo and does not establish a separate legal entity

• JVCo is a joint venture (also a corporation) between HQCo and the external corporation ExCo (ExCo is a third party to the HQCo-group)