Forming 3 Related Companies - is This Ok

[packbiz]

My question involves business law in the state of: Wyoming and California

We are a group of 6 people. We would like to do the following:

1) Start Company X (C Corp or LLC in state A), with the 6 partner having equal shares. This company would own the patents and trademarks for 4 products and 4 mfg processes. This company would then issue a Master License for the use of these patents and trademarks to Company Y.

2) Company Y would be founded (C Corp in state B), with the equity evenly divided amount 10 partners: The six individual partners of Company X – each getting one of the 10 parts of equity, with the remaining 4 parts going to Company X itself and 3 new partners. Company Y would have the Master License for the use of the patents/trademarks of Company X, as well as it’s own trademarks for products it makes with those patents. 15% of all income would be paid to Company X as a royalty for the use of those patents and marks.

3) Company Z (C Corp in state C) would divide it’s equity equally among 9 partners: The six individual partners of Company X – each getting one of the 9 parts of equity, with the remaining 3 parts going to Company Y itself, 1 new partner and 1 Investor. This company would have the exclusive sales License for the distribution of Company Y’s products for a specific sales channel, as well as it’s own trademarks for it’s own branded products made with the trademarks of Company Y. Company Z would buy it’s products from Company Y, as well as pay 15% of all sales to Company Y as royalty for the use of Company Y’s trademarks.

We are doing this for various reasons. The companies would be set-up in sequence – X first followed a few months later by Y and finally Z. The 6 main partners will contribute capital in all three companies.

My question – Is the set-up of these 3 companies legal?

What about the way royalty is paid?

Does this violate any tax laws?

[Scott67]

Yes, you can do this. On the surface, there is nothing illegal in what you propose. However, the devil is in the detail in something like this and no one here will see the documents that you use to set it up and thus couldn't definitively say that everything you are doing is legal.

If you brought this kind of scheme to me as a potential investor or business associate, I would be very skeptical. Unnecessary complexities in business structures are almost always intended to do someone wrong. I would view this as a probable scam and would probably not be willing to try to dig deeper to find where the scam is.

[packbiz]

Thank you. I just wanted to check this.

No scam here - we are the ones investing our money, and only Company Z has an outside investor but it is a small amount.

Main purpose is protection of assets, division of resources for sweat equity partners (not many) and guarantee of ROI.

Obviously the founding documents have to be coordinated, but I just wanted to check that this concept was legitimate.