Two sole traders in same house selling to each other

Monkeyman69

Hello, new to forum so hope is ok to post and someone can help me.

I setup an online business a few months ago and it has grown very quickly. I trade as a sole trader currently. Basically I make a product by hand and sell it on ebay. I have been a sole trader before so know how to do all my expenses / receipts and have spreadsheets setup with everything in lovely detail. The revenue from the business is growing very quickly from £1,000 in the first month to £3,000 month three and most likely £4,000 this month. My partner currently works part time but we might look at her joining in..

My question is.. is there anything to stop here being a sole trader too. Making the product and then my company buys the product off of her and we sell it on?? The only reason I ask is the tax man might sell well you could sell the item at too high / low price to the other business.. but as both are based in the same household it really wouldn't make a difference as what one business gains the other loses and therefore the other one just has to pay more tax and so on.. I just wanted to make sure there was no law against it.. I tried to find something online but couldn't as it's such a detailed question..

Business A - Makes item for 50p. Sells items to Business B for £1.. Business B sells items for £2...

This would be a lot better in terms of splitting income and not having to have her as a paid employee. The other option we looked at is her just having her own trading account and we split the products 50/50 but that's pretty much the same as the first thing..

Any help would be welcomed. :beer:

da_rule

There is a third option. Sign a partnership agreement and trade together as a partnership. You can then split the profits on a 50/50 basis. Or, you could assign one of you a higher share of the profits if it makes better tax sense.

McAnniee

Is it a 'contrived' arrangement in that her business would only exist to seek to supply your business with no intention of seeking a profit in its own right? in which case it would likely be frowned on / seen through quickly by HMRC.

As the previous poster suggested I would suggest openly going into a business together; or employ her directly (or as a Director etc if you have a Ltd co) for your own company.

marlot

It's not terribly difficult to set up a limited company. You'll have to do some book-keeping and accounts, but will give you more flexibility.

getmore4less

If you have grown and reached capacity of one person working reasonable hours in three months part of scaling up you need to look at pricing.

You could be underselling.

How much are you making an hour?

how much do you think demand would change if there was a upward price movement.

No point giving them away.