Affiliate

The process of getting to know someone involves what we're going to call "climbing the ladder of friendship." The two of you get closer over time, eventually going from stranger to acquaintance to buddy to chum to friend to BFF and maybe on to lifelong companion. The same can be said about companies.

Companies can form different kinds of associations. These relationships can range from simple business dealings that make them clients or vendors...to closer ties, such as one firm being a full-fledged subsidiary of another.

One of these degrees of separation is called an "affiliate." Generally, this designation means one company owns part of another company, though they do not hold a majority stake.

In some cases, the two companies might hold minority ownership stakes in each other. Businesses will often try to cement long-standing partnerships by taking small ownership stakes in each other. This practice allows the companies to see each other's financials, and helps ensure a close working relationship.

Also, large companies with key vendor relationships might seek to take small stakes in these vendors. This helps secure supply lines and provides the bigger company more control over its production process.