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SharePoint groups are created at site collection level and are assigned to a site. By site collection level it refers to root site. So, reframing the above sentence we get:- SharePoint groups are created at root site level and are assigned to a site. Is this concept correct?

When we create a new site under site collection (subsite under root site) then we can go in the subsite and create groups. While creating site it asks us whether we want to inherit the permissions of parent. Then why does Microsoft state that:-

SharePoint groups are created at site collection level and are assigned to a site. Groups cannot be added to a site directly—they must be added to the site collection.

The above lines are from Inside SharePoint 2010 ebook, page 460 last para and page 461 1st para.

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The groups are still created at the root level. However, the permissions associated with these groups are specific to a sub site. Create new groups in the sub site and then go to parent root site and check the description of the group: Use this group to grant people contribute permissions to the SharePoint site: NameOfSubSite

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