In practice, companies are frequently owned by other companies. Intertwined ownership structures can make it difficult to understand how a company operates, what parts of it are regulated by which government entities, and what part may be of particular interest in a news story. There are parent companies, holding companies, and shell companies, to name a few.
Parent companies are those that own enough stock in another company (called a subsidiary) to control it.
A holding company is a corporation that owns stock in other companies. A pure holding company is established only to hold shares in other companies. A large holding company can control many individual companies. For example, Sears Holdings Corp. has among its subsidiaries Kmart Corp., Lands’ End, Inc. and Sears, Roebuck and Co.
A shell company is a business entity that is not actively engaged in business and has no or few assets. Although some have been abused in money laundering and tax avoidance schemes, shell companies have legitimate uses. For example, publicly traded shell companies are used in reverse mergers, when a private company buys the shell, allowing it to be traded on the market without going through the required initial public offering.