Owning Two Businesses

[Sean Anderson]

California

I am planning on starting a new business with some partners. We are setting it up as an LLC.

In setting the company up, we have found that it may be beneficial to start up two companies, each of which performs separate parts of our original idea.

One company (will call this Compay 'A') will sell products to the other (Company 'B') for little to no profit. The money Co. 'A' makes will be donated to charities, etc. Co. 'B' will sell that product to an outside source for a larger profit.

Is this leagal?

Sean

 

[jandjinter]

honestly, it doesn't sound legal to me. correct me if i miss understood, but it sound like your selling the products twice.

 

[Sean Anderson]

Two Businesses Cont.

Company 'A' collects products and sells them. The money received from the sell would be used to cover expenses; the profits will all be donated to charities and selected programs. (sort of like Newman's Salad Dressing, where all of the profits go to charity)

The only catch here is that Company 'A' sells the products to Company 'B' (a completely separate entity).

Company 'B' purchases the products from Company 'A' because Company 'B' has the resources to distribute the products back into the main-stream.

Company 'A' sells to Company 'B' because Company 'B' is not specialized in locating a purchaser who will get the products back into the main-stream.

Is there a term for this sort of thing?

 

[jbrianp]

i dont think its illegal, but for what purpose are you doing it? i can understand company A's position to minimize taxes, but you aren't doing anything to minimize company B's. might as well just have the single company, unless company B is inc'd in Nevada, where there is no income tax.

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