Thoughts on using "consultancy fee" income in an existing retail business

Discussion in 'General Business Forum' started by Noah, Dec 8, 2018 at 3:28 PM.

  1. Noah

    Noah UKBF Enthusiast Free Member

    872 203
    Hypothetical scenario : The leading shareholder and director (LS-D) in a retail business (Biz-R) has an opportunity to participate in a separate project that could earn a decent wedge; there is a connection between the nature of the project and the retail business, so it seems to make sense, for mutual benefit, for LS-D to participate as "LS-D of Biz-R"). LS-D therefore thinks that aforementioned wedge should be subsequently invested in Biz-R.

    I know there are all sorts of other considerations here, but I am still working on teasing them out, so for now the question is : What mechanism might work for LS-D to put the money into Biz-R?

    This is in the bookkeeping / accounting context, rather than shares / equity, etc.; i.e. Biz-R currently only generates income by selling stuff to customers; how might a "consultancy fee" be shown on the books?

    Note that there are personal reasons why LS-D would not want to just trouser the money, so debate on that possibility is not worthwhile.
     
    Posted: Dec 8, 2018 at 3:28 PM By: Noah Member since: Sep 1, 2009
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    14,037 2,993
    get Biz-R to send an invoice to the customer with "Consultancy services provided by LS-D" as the description.

    In the Profit and Loss Account it should appear as a line below Gross Profit.
     
    Posted: Dec 8, 2018 at 4:53 PM By: Scalloway Member since: Jun 6, 2010
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  3. Noah

    Noah UKBF Enthusiast Free Member

    872 203
    Yes, when I mulled this over I realised I was probably over-complicating it. Thanks for confirming.

    Are there any implications of tax-dodging or money-laundering regulations?
     
    Posted: Dec 9, 2018 at 9:38 AM By: Noah Member since: Sep 1, 2009
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  4. Scalloway

    Scalloway UKBF Legend Free Member

    14,037 2,993
    Posted: Dec 9, 2018 at 12:15 PM By: Scalloway Member since: Jun 6, 2010
    #4
  5. Noah

    Noah UKBF Enthusiast Free Member

    872 203
    Good point. I reckon "No" as LS-D is an employee of Biz-R in role as Director (and is on payroll), and the invoice will be payable to Biz-R :
    Thanks for your help - no more questions implied, I don't want to over-tax your free advice quota!
     
    Posted: Dec 9, 2018 at 12:40 PM By: Noah Member since: Sep 1, 2009
    #5