Affiliate: Definition in Corporate, Securities, and Markets

An affiliate describes a business relationship in which one company is related to another but does not have a controlling interest. The term applies across corporate ownership, securities, capital markets, and commerce (notably retail and e-commerce). Affiliates also refer to companies that cooperate commercially—such as sites or partners that promote and sell another company’s products for a commission.

Key takeaways

• An affiliate typically involves a minority stake (less than 50%) or a relationship under common control rather than full ownership.
• In commerce, affiliates earn fees or commissions by marketing or selling another company’s products or services.
• Affiliations take many forms—corporate ownership ties, commercial partnerships, affiliate networks, and international subsidiaries with varying legal and tax consequences.

Corporate definition and examples

In corporate and securities contexts, an affiliate is an entity related to another through ownership or control, but without majority control. For example:
* If Company A owns 40% of Company B and 75% of Company C, then B is an affiliate of A, while C is a subsidiary of A.
* Executive officers, directors, large shareholders, subsidiaries, parent companies, and sister companies can all be considered affiliates depending on control relationships.

For tax and reporting purposes, different thresholds may apply. For instance, U.S. rules for consolidated tax filings generally require a parent to own at least 80% of voting stock to treat a company as a consolidated subsidiary.

Retail and e‑commerce affiliates

In retail and online commerce, an affiliate is a person or business that promotes another merchant’s products or services and receives a commission on resulting sales or leads. Typical elements:
* The affiliate channels traffic or sales to the merchant (via links, ads, or storefronts).
Sales may be transacted on the affiliate’s site or tracked back to the merchant for commission purposes.
Affiliate marketing commonly uses networks and referral programs to manage tracking and payouts.

International affiliates

Multinational firms often use affiliates to enter foreign markets while limiting liability and protecting the parent brand. Affiliates can isolate foreign operational risks or legal exposures from the parent company.

Affiliate networks and other forms

• Affiliate network: a group of companies or partners that share leads, cross-promote services, and coordinate commission-based referrals.
• In banking and finance, affiliate banks or entities may underwrite securities or access markets where the parent lacks direct presence.
• Contractual definitions (e.g., in loan agreements) typically describe an affiliate as an entity that controls, is controlled by, or is under common control with another entity, excluding subsidiaries in some clauses.

Affiliates vs. subsidiaries

• Affiliate: generally indicates a minority stake or a relationship under common control without outright control.
• Subsidiary: the parent owns a majority (>50%) of voting stock and has controlling authority, including board appointments and executive management decisions.

Legal and regulatory considerations

Affiliates can trigger special legal, regulatory, and disclosure requirements:
* Insider trading rules and related prohibitions often apply more strictly to affiliates because of access to nonpublic information.
Tax, consolidation, and reporting rules depend on ownership thresholds and jurisdictional law.
Contractual agreements commonly define affiliate status to allocate rights, restrictions, and liabilities.

Summary

An affiliate denotes a close but noncontrolling relationship between companies or a commercial partner that promotes another’s products for payment. The specific legal, tax, and regulatory implications depend on ownership percentages, contractual definitions, and the industry context. Understanding these distinctions is important for corporate governance, compliance, and commercial partnerships.