Legal Definitions - controlled group

A controlled group is a term used in tax law to describe two or more corporations whose stock is mostly owned by five or fewer people. These corporations are subject to special rules for calculating their tax liability. Examples of controlled groups include parent-subsidiary or brother-sister groups.

• A parent company owns 80% of the stock of its subsidiary company. The two companies are considered a controlled group.
• Two brothers each own 40% of the stock in two separate companies. The two companies are considered a controlled group.

These examples illustrate how a controlled group is formed when a small group of people own a significant portion of the stock in multiple corporations.