Money laundering?

[Clairelaw]

I have two limited companies one is retail and one is a wholesaler.

The retail company is established for several years. The wholesale company is brand new.

Certain suppliers/brands will only deal with the retail company as the wholesale company is so new. I have been given advice that the only way the wholesale company can sell to my customers (other retailers) is if my retail company sells the stock to my wholesale company at a 10% markup. Otherwise it would be seen as money laundering.

Is this correct and is there any legal way around this as it is going to reduce profit margins.

 

[Ozzy]

I disagree with the advice you have been given, because you have laid out a justified explanation on why you have needed to do this. Although it does seem like a quite unnecessary piece of agro to go through, do you have sufficient cashflow to pay on order for the supplies? (that way eliminating any concern of bad debt the suppliers may have)

 

[Clairelaw]

I disagree with the advice you have been given, because you have laid out a justified explanation on why you have needed to do this. Although it does seem like a quite unnecessary piece of agro to go through, do you have sufficient cashflow to pay on order for the supplies? (that way eliminating any concern of bad debt the suppliers may have)

The issue is simply that certain brands and distributors will not supply to a brand new company which is what my wholesale company is. This is irrespective of paying proforma. So they will happily sell to my retail company.

Yes it is going to be extra book keeping etc as well. This was advice from the local business centre.

 

[Ozzy]

So they will happily sell to my retail company.

Bonkers, just my personal reaction that a supplier chooses to be that way when you're clearly the same UBO and operation. Heh ho.

This was advice from the local business centre.

As I crawl under my desk for any backlash, I'd give my credibility to advice from your accountant on this than someone from the local authority (assuming your LBC is LA run).

 

[thetiger2015]

Yes it is going to be extra book keeping etc as well. This was advice from the local business centre.

They advised you have two Ltds?

As suggested above, it would be best to seek the advice of an accountant, because it sounds overly complicated to me.

We have retail/wholesale under the same Ltd Co. We wouldn't split them unless they were both generating significant turnover and it made financial sense to have two separate teams of people.

There could well be a reason for this of course, it's difficult for us to know without all the facts.

 

[japancool]

I wonder if artificial separation could be an issue with two companies, even if the customers are segmented.

 

[MRQ]

This was advice from the local business centre.

Otherwise it would be seen as money laundering.

Sorry... can you clarify; it was the local business centre that spouted this money laundering nonsense? Or was it the supplier behaving like small children playing 'shops and offices' in the backyard? Who suggested the two LTDs?

Money Laundering is a serious crime... and as such, not an accusation to be levelled lightly.

My personal experience of LEOs including the independent charities and CICs, is that it's very rare for them to employ people with genuine business experience; and by that I mean experience of running a typical small business. - They tend to hire failed Bank Managers, washed up middle-aged corporate drones, politicos and dreamers found chanting mantras in the echo chambers of LinkedIn...

They exist to justify their own existence.

As others have suggested; probably best to get advice from a decent independent Accountant... they actually will tend to have the background and experience of dealing with/being 'one of the 99%'.

 

[MOIC]

Do everything from your ‘Retail’ Ltd and list the retail/wholesale sales in your accounts, if required by your accountant.

If it’s essentially the same products, why have 2 Ltds?

Do you hope to sell one as a separate concern in the future?

 

[Scalloway]

Can you not just have two trading names?

 

[JEREMY HAWKE]

If everything has gone through your accounts it is not money laundering

Money laundering is when your employees have a good few months selling specially grown products lovingly brought on by your Indonesian gardener.

The selling of this fine produce from their blackout BMWs then requires some creative accounting
You them attempt to bring it into the normal money system for your new house purchase in Kensington

The fake invoices and other skulduggery to do this could be money laundering

 

[Baines Watson]

The issue is simply that certain brands and distributors will not supply to a brand new company which is what my wholesale company is. This is irrespective of paying proforma. So they will happily sell to my retail company.

Yes it is going to be extra book keeping etc as well. This was advice from the local business centre.

As mentioned by other members, both activities, wholesale and retail sales, can be done under the same Company.

Feel free to contact us if you need professional advice in relation to this.