Question about business laws

[TMF Jeff]

I've been watching Shark Tank, which is a really fun and awesome show about entrepreneurs pitching to investors, and one of the things that happens a lot is the investors will say something like "You've invented a new dishwasher, well I own 300 restaurants, so there's a lot of room to work together."

So my question is, are there laws governing how those two businesses have to interact? Like if one guy owns a dishwasher company and a restaurant chain, can he sell the dishwashers to himself at the cost of manufacturing it, essentially causing the dishwasher business to take a loss? Or is that one of those non-competative things?

 

[Flatfoot]

If he owns both businesses, he could do that, if it favors him, tax-break-wise. However, I'm no CPA. I think it could also depend on how he elected to be taxed (assuming he's got LLCs, which can choose how they are taxed.). If his company is a corporation, or an LLC taxed as a corporation, I don't see why he couldn't take advantage of this tax loophole, as his business would be considered a separate entity than him, limiting his legal liability. It may even work with sole proprietorships, but I don't know. I have zero interest in sole proprietorships, and do not understand why anyone would choose to have one. There's just too many ways for a person to risk litigation and lose personal assets, that way.

Come to think of it, it may be just as advantageous for him to buy/finance the dishwashers at wholesale price and then just take advantage of the depreciation deduction in the first year.

 

[Bohemianne]

IMHO as layperson... As long as both businesses are legitimately registered separately, say as two corporation, then there is really no conflict of interest on how both systems operate. The internal relationship/interest would not affect how they make profit, unless one will manipulate the supply and demand of the product (dishwasher).