Who should process payments?
Suppose:
- Company A owns product P
- P is managed by company B
- The sales contract is between A and customers
- A has a contract with B such that B receives all income generated by P
Could B directly take payments from customers on behalf of A such that the sales contract is still with A? Or does A have to receive sales payments then pay it all to B?
It might be a bit convoluted, so thanks for your patience in advance.
Thanks
2 Answers
Anything is possible if all parties agree.
However, if I understand correctly, A has a vested interest in handling payments. The contract between A and B obligates A to provide B with all income (revenue less expenses). Providing B all revenue is a greater obligation and deprives A of direct access to funds to pay for expenses.
An additional consideration is that B would gain direct access to the customers and B would have increased ability to cut A out of the business.
-
Thanks. What if A is to provide B with all revenue, then could B process the payments? Basically A wholly owns B, but A has all the IP rights and ownership of the product. So B is a foreign subsidiary. – Kate 12 years ago
-
Just to add that, since A is the parent of B, I was wondering if sales contracts could be made with A, but B handles all the payments and keeps the cash. – Kate 12 years ago
-
This makes more sense now. One of the purposes of having a parent holding company is to provide an extra layer of protection against liability. In this way of thinking, B would handle all aspects of the sales transactions as well as shoulder all the liability (save potential invalidity of the IP), and send the income upstream to A. I am assuming that B is a wholly owned subsidiary. The more A gets involved, the more likely it would be liable in addition to B if an issue were to arise. – Yorick 12 years ago
-
Ah. Indeed. However, does the income have to be sent to A even if the intention is to let B keep all revenues generated? That is, if the contract between A and B is to let B receive all revenues generated by P, could B handle the payments and keep them in its own bank account? B is a foreign company, so I think forex can become a hassle. A is a bit like a holding company, actually. – Kate 12 years ago
-
Sure, B could keep all the income. It could also be structured that all the revenues are spent on expenses by B so there is no income. You should probably talk to an accountant with experience in foreign corporate tax. – Yorick 12 years ago
I agree with Yorick. Might as well ask for a professional advice from a corporate lawyer to settle things. Since B is the one managing the product P, B should be the one interacting with the consumers to avoid confusion.
More info about affiliate marketing:
http://en.wikipedia.org/wiki/Affiliate_marketing
