Joint trading arrangement

Joint trading arrangement

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Limited Company & partnership (partners not related parties to company or company shareholders). Both entities carry out different trades and are VAT registered.

The above entities currently both trade separately for a common major customer.

Customer wishes to deal only with the Limited company for both entities/classes of work.

Limited company has agreed to invoice for the partnership work that is carried out for this major customer (partnership does work for other customers not common to Limited company). The partnership will then charge the limited company 100% of the value invoiced to the major customer as their subcontract cost. Leaving the Limited company with no profit from these transactions.

Any additional costs eg stationery, increased liability insurance + other overheads will then be recharged to the partnership by the limited company.

A legal contract will be drawn up to cover any legal issues regarding the work carried out.

Are there any problems that anyone can see resulting from this other than a fall in gross profit%, and possible cashflow issues ?
Dan

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