We are a small vehicle parts /repair company, and one of our suppliers (He is a one man band) is retiring in a few months. He has made an offer for us to purchase his remaining stock from him on a 60/40 basis (This would incl ude his current customer data base that we would continue to use)
In other words we sell the remaining stock on his behalf, splitting the rev enue with him 60 to us/40 to him.
With the 60% of the proceeds that we retain in the business, 30% of this is to be reinvested in the same stock - again the revenue of this will be spl it 60/40 with 30% of our 60% being reinvested in new stock and so on.
I guess for our books any sales that we make from the current remaining sto ck we can assign a new sales nominal code, so when this stock is sold we ca n keep a track of the sale of this specific stock.
However when it comes to paying the "retired" supplier his 30% I guess we need to either raise a dummy purchase invoice on our accounts system (Sage) in order to record & the payment to the retired supplier
However I'm not sure about the financial implications for the retired suppl ier in terms of:
* For his own records, should he be raising an invoice to us for the 50% of proceeds (Once we advise him of this figure each month?)
* As he will be drawing a pension - I guess he will need to declare this e xtra income for tax reasons
I just want to have an understanding of any implications that may arise fro m this and put procedures in place prior to this commencing.
Any advice would be welcome.