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Thread: Structuring as a Production & Supplier Company

  1. #1
    New Member
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    Feb 2016
    Cape Town
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    Structuring as a Production & Supplier Company

    Hi all,

    I've got a question about structuring a production company with a vision of supplying directly to various large retailers. Due to retailer constraints though I'd like to know whether it would be in my best interest to open a new company to deal with each large retailer for purposes of maintaining autonomous contract mandates & seperate cashflow (ie: If I sell coffee to Woolworths they may have special demands or packaging demands which differ to those of Pick 'n Pay).

    And if the answer to the above question is no - should I be looking at splitting the production company and the supplier company at the least.
    Eg: Where my production company farms and imports coffee beans, then refines them into coffee grounds, should a secondary company be created specifically as a vehicle for on-selling those coffee grounds to retailers in order to reduce liability?

    Please let me know if this was the right place to post btw, and if there's a way I can improve on in terms of answering questions.

    Thanks all.

  2. #2
    Full Member
    Join Date
    Jul 2015
    Thanked 5 Times in 4 Posts

    Think the simplest structure would be the best to start with. Not sure where you currently are in terms of your business so apologies if I not answering what you need. Supplying retailers can be somewhat challenging. It would be worth determining actual interest before doing to much structuring - and seeing if it's worth it.

    For food products you will need quite a bit of paperwork / certification and having separate companies may lead to duplication in terms of costs / admin. Labeling will also need to comply with our food legislation.

    It may be worth looking at supplying via a warehouse / distribution company so you don't need to merchandise yourself.

    Good luck - let us know how it goes. (I drink my way through my fair share of coffee....)

    Kind regards

  3. #3
    Gold Member
    Join Date
    Jun 2010
    Thanked 177 Times in 146 Posts
    Each new company you open incurs cost and effort. I'm not just talking about the CIPC registration fee, you should remember annual accounting fees and annual company returns too. Then each admin task is duplicated for each company: monthly and annual tax returns, COID returns, book keeping accounts, bureaucratic government registrations, etc. With the supplier/production arrangement you will then need inter company invoicing.

    So I would suggest that you only start creating extra companies if its really necessary. Common reasons would be:
    Different shareholders
    Separating assets for protection
    Main activity being in completely different markets

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