Hi
I am a Director of an established company. I am setting-up another company which I will also be a Director of.
Call them 'Company A' and 'Company B'.
Company A will buy goods from Company B. Those goods will be sold on to the customers of Company A (Company A is a reseller). Company A will invoice those customers.
Company B will buy those goods in from a completely unrelated company - or companies, dependant upon the product to be supplied.
Company B will then supply said goods to Company A and invoice company A for the goods supplied. Company A will pay Company B.
Is there anything wrong with the above scenario in a situation where I am a Director of both companies A and B?
Thanks,
N
Replies (18)
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Wrong?
Nothing wrong as such, but unless there is a point to the arrangement it may be a waste of time.
What objective are you trying to achieve?
@bignige
Well, you know best, obviously. But everyone else thinks you're adding an extra layer of complexity to the structure.
Companies C and D
Can't you form another couple of companies (of which you are a director, of course) and include them in the supply, invoicing and payment train?
Thought I saw what you meant at first
But actually I don't. Suppose company A is Rare Stamps Ltd and company B is Hand Grenades Ltd. If you want to diversify into hand grenades I can understand why you would set up company B. But why would Hand Grenades Ltd then sell the hand grenades to Rare Stamps Ltd to market them?
Perhaps I have misunderstood.
To extend the above helpful analogy further, what does not make sense here is that the OP wants Rare Stamps Ltd to sell hand grenades. But his problem is not that customers won't come to Rare Stamps Ltd to buy hand grenades - he seems entirely confident that they will - but it is that Rare Stamps Ltd won't be able to buy hand grenades to sell to them - which make no sense.
The idea that, all things being equal, suppliers will refuse to accept orders from customers whose names they don't like is one that I find very strange.
Sounds like the OP doesn't want company A to 'officially' trade in the new product line, but wants to sell the new products to its existing customer base.
So if im customer Z, and have been buying from company A for may years, and I want New Product H - then Company A tells me that although they don't sell that, they can get it as a one off. If the product line takes off then company A introduces company B - but if it doesn't then company A stops supplying new product H and (publicly at least) there is no failed expansion plan
Pointless - yes. Harmless - yes also
No
but you would have to declare interest in both company accounts notes (related party disclosures)
is this to setup a wholesale - + retail buisiness
where W may sell to ,others + competitors to A where the product[s]of W have a wide appeal
review VAT and any duty / bonding / transportation issues if importing in order to get correct 'retail' pricing
Refused to supply?
This is the part that doesn't make any sense. Company A has approached a PPE supplier/manufacturer - they have refused to supply a company that operates in the printing industry - it doesn't make sense to them for a publishing business to be selling PPE.
Are Company A asking for discounts based on the amount they expect to order? Will the PPE supplier/manufacturer somehow risk their reputation in this arrangement? Basically what is the downside for the PPE company of the greater income (and profits) they would receive by taking on Company A as a customer?
As it stands, the given reason for not supplying Company A sounds entirely irrational. If that is truly the case, what makes you think they will be any more ready to trade with a company that has only just come into existence?
Simpler, no?
It seems to me that it would be much simpler to do it like this:
1) Rename original company from "Bignige Printing Ltd" to something that is more ambiguous such as "Bignige Ltd" whilst still trading and having a website as Bignige Printing.
2) Set up the PPE brand and website as a separate division under "Bignige Ltd"
3) Make the new Director head/manager of the PPE brand if it suits.
4) Buy the PPE gear as "Bignige Ltd" and sell/market it from whichever brand or site is most suitable to the market.
Only one company is needed as long as you can get the shares right.
Very persuasive
"A person has come along who wants to join the business as a Director - but knows nothing about publishing/printing"
Do you need this person? You haven't exactly produced a persuasive reason. Maybe you don't think it's important.
Ok Nige
Well, nige, ok, my answer to your OP is "no"
I can see some thread of logic in what you say but it still seems a long way round the houses.
"Is it 'a part of (the
"Is it 'a part of (the publishing company) or 'a subsiduary of (the publishing company)' or '(the publishing company) incorporating (the PPE brand name) - or, something else?"
It can only be a subsidiary if it is a company.
It's part (or a division) of the publishing company.
Trading name
You need to disclose the limited company name on all communications. You can use the brand name to head invoices and include a form of words such as "Brand Name is a trading name of PPE Ltd"