How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Attorney Arcadier Your Own Question
Attorney Arcadier
Attorney Arcadier, Attorney
Category: Business Law
Satisfied Customers: 1106
Experience:  Contract questions and Incorporation questions answered.
63302635
Type Your Business Law Question Here...
Attorney Arcadier is online now
A new question is answered every 9 seconds

Hello, My brother and I own a small company in Hong Kong

This answer was rated:

Hello, My brother and I own a small company in Hong Kong selling DVDs (let's call this Company A). I am planning to open a LLC in US to start selling DVDs on Ebay and Amazon (let's call this Company B). Since Company B will operate in US, Company B will report all profits made on Ebay and Amazon to the IRS. Now, my question is: Since Company B cannot buy directly from the wholesaler (Company A has exclusive rights as a distributor), can Company B buy DVDs from Company A? Let's say Company A buy DVD from a wholesaler at $10 a piece, and Company A sell the DVD at $15 a piece to customers in Hong Kong. Can company B buy DVD at $15 a piece from Company A, sell them at $17 a piece on Amazon, and report a profit of $2 to IRS. I'm just afraid there is a conflict of interest since I am a partner in Company A and will be a sole owner of Company B. If Company B gets audited by IRS, would they consider the cost of each DVD to be $10 instead of $15. Thank you for your help. I just want to make sure I get all the facts straight before opening an Ebay account. Thank you. Let's say,


Attorney Arcadier :

Assuming company A has resale rights from its wholesalers, and Company A permits its owners to enter into related business relationships, then this is a good strategy. Company B pays taxes, but its profit is controlled by what A charges. The more A charges, the less taxes B pays. The more B pays, the more profits A makes and A will only be liable for the taxes where it transacts business and B and A will consumate their agreement outside of the U.S. This strategy works.

Attorney Arcadier and 7 other Business Law Specialists are ready to help you

Related Business Law Questions