Controlled Group Merely Because Other Company Provides Payroll Services, etc.?

[austin3515]

Person A owns 100% of Company Y.

Person A owns 40% of Company Z. Persons B, C and D own 20% apiece of the remaining 60%.

So Y and Z are not a controlled group.

They both own the same brand/franchise so there is a lot of commonality in what needs to be done.

They sell a product; it's not a service business.

Company Y handles the following for Company Z, to take advantage of economies of scale: Payroll, Accounting (Payables, GL, CFO's time, invoicing, billing, etc). In exchange for these overhead services, Company Z pays Company Y $X per month as an overhead charge.  There is no itemization of any expenses. There is no extra charge in a "bad month" but the contract between the two is an arms length contract.

 

[CuseFan]

Austin, is there a question here?

Y and Z are not a CG, as you note.

As they are not service organizations, I don't think there is an ASG either.

Or is there another question?

 

[austin3515]

Sorry that was it.  I just want to make sure there is not some crazy rule that will pull these together (shared employees, employee leasing, etc).

My personal opinion is that Company Y is just a vendor to Company Z.  Running all testing separately.