What characterizes a wholly owned subsidiary?

A wholly owned subsidiary is characterized by the fact that it is completely owned by another company, often referred to as the parent company. This means that all the shares of the subsidiary's stock are held by the parent company, giving it full control over the subsidiary's operations, decisions, and financial outcomes. The parent company can manage the subsidiary to align with its overall business strategy, making it an integral part of its operations.

The other options do not accurately define a wholly owned subsidiary. For instance, a company that is partially owned by external investors indicates that it has shared ownership with parties outside the parent company, which contradicts the concept of a wholly owned subsidiary. Similarly, a requirement for a company to operate independently does not apply; a wholly owned subsidiary typically operates under the parent company's control rather than independently. Lastly, a partnership between two companies implies shared ownership and control, which again does not fit the definition of a wholly owned subsidiary, as there is no sharing of ownership in this arrangement.