Division (business)

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A division of a business, sometimes called a business sector or business unit (segment), is one of the parts into which a business, organization or company is divided. [1] The divisions are distinct parts of that business. If these divisions are all part of the same company, then that company is legally responsible for all of the obligations and debts of the divisions. [2] However, in a large organization, various parts of the business may be run by different subsidiaries, and a business division may include one or many subsidiaries. Each subsidiary is a separate legal entity owned by the primary business or by another subsidiary in the hierarchy. Often a division operates under a separate name and is the equivalent of a corporation or limited liability company obtaining a fictitious name or "doing business as" certificate and operating a business under that fictitious name. Companies often set up business units to operate in divisions prior to the legal formation of subsidiaries.

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Generally, only an "entity", e.g. a corporation, public limited company (plc) or limited liability company, etc. would have a "division"; an individual operating in this manner would simply be "operating under a fictitious name".

Examples

Technology

An example of this would be to look at Hewlett Packard (HP), the computer and printer company. HP has several divisions, with the printer division, that makes laser and inkjet printers, being the largest and most profitable division. The divisions of HP, like the Printing & Multifunction division, the Handheld Devices (includes the old calculator) division, the Servers division (mini and mainframe computers), etc., all use the HP brand name. But, Compaq (a part of HP since 2002), operates as a subsidiary, using the Compaq brand name.

Another less obvious example is that Google Video is a division of Google, and is part of the same corporate entity. But the YouTube video service is a subsidiary of Google because it remains operated as YouTube, LLC, a separate business entity even though it is owned by Google.

Automotive

Mack Trucks continues to run itself separately, but is a wholly owned subsidiary of AB Volvo. Volvo Trucks also sells trucks under the Volvo name. Within Mack, there is a division named Mack de Venezuela C.A. that does final assembly and sells trucks in South America.

Financial Services

In the banking industry, an example would be OneWest Bank and its relationship with CIT Bank. CIT Bank is the retail banking segment of financial services company CIT Group. OneWest Bank, although a separate legal entity, is classified as being a division of CIT Bank. [3] OneWest continues to use its own logo and has a branch of retail banks in Southern California, but for the purposes of running its business and reporting financial results, CIT Group consolidates all OneWest Bank activity into CIT Bank. [4] In addition to its OneWest Bank division, CIT Bank includes an online bank.

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References

  1. Longman Business English Dictionary
  2. "Differences Between Wholly Owned Subsidiaries & Divisions". SmallBusiness.Chron. Retrieved 17 March 2019.
  3. "About US". OneWest Bank. Retrieved 17 March 2019.
  4. "CIT Group 2018 10-K". Securities and Exchange Commission. Retrieved 17 March 2019.

See also