What is an Affiliate?
Affiliate – is a business term, is an “official connection” of one business entity to another. Official connection implies a contract or agreement of some kind and an announcement to the public of the connection between the two businesses.
The term has two more specific uses in business contexts:
- Incorporate law and taxes, an affiliate is a company that is related to another company, usually by being in the position of a member or a subordinate role, a subsidiary. According to Investopedia, a subsidiary is a company “whose parent is a majority shareholder.” (That means the parent owns 51 percent or more of the other company’s shares of stock.
An associate like a subsidiary, but the associate is “less than 50% owned by the parent company.” Two companies may be affiliated if one company has control over the other or if both are controlled by a third company.
One corporation can be affiliated with another corporation by shareholdings, by holding a minority interest (that less-than-50% mentioned above), or one corporation might be a subsidiary of another.
- In online retailing, affiliation is common in marketing and selling wherein one company may associate with another to sell products or services. The seller has a website on which associate may sell products. The seller has control over the site and pays a commission to associate. This relationship is sometimes called “affiliate marketing.”
- Amazon affiliates are called “Amazon Associates.” The associates sell on Amazon’s website, and Amazon takes a percentage of the sale price for its fee.
- In broadcasting, local TV stations are associate of a national network. These local stations are locally owned, but they use network content and advertising.
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