A trading company is a company that specializes in buying and selling products, acting as an intermediary between manufacturers and customers, and arranging the delivery or introduction of the products to a specific market.
Trading companies that ultimately deliver the goods to the customer also set up stores and warehouses so as not to become dependent on a manufacturer's ability to supply products on demand. Another peculiarity of trading companies is that they usually act as points of sale for several manufacturers; That is, one outlet sells the goods manufactured by several companies. Although this is not a requirement, in practice it is very likely that a shop selling the products of only one manufacturer will be a retail outlet of that manufacturer and not a trading company. In addition, trading companies can arrange all necessary procedures for the delivery of goods, including procedures for international trade.
Depending on the particular business, a trading company can function as either a retailer, a wholesale business, or a combination of both. A retail company sells products to end customers, usually in comparatively small quantities. A wholesale company caters to other businesses (including other trading companies) and typically sells products in bulk for further distribution, e.g. in retail stores.
Functions of a trading company
The functions of a trading company depend on the particular industry in which it operates, but generally include the following:
Purchase of goods from manufacturers
Sale of goods to businesses and consumers
store goods for sale
Matching goods in a retail chain
Furnishing of storage rooms and points of sale
Management of international commercial operations
Make logistical arrangements for the delivery of goods
In general, the main function of a trading company is to source goods from manufacturers and deliver them to customers. In this context, a trading company can undertake any task necessary to achieve this purpose. They may also be involved in the negotiation and use of land grants that allow a company to own, manage, and develop a property, including land and buildings. Obviously, for a trading company as a legal entity, this is an additional opportunity and not an essential business function or function.
Types of trading companies
There are two primary types of trading companies:
B2B (Business-to-Business) Trading Company
B2C (Business-to-Consumer) Trading Company
B2B (Business-to-Business) Trading Company
The most extensive use of trading companies is as intermediary trading companies or B2B companies. These businesses usually 1) specialise in a certain range of products or services, which they purchase from suppliers or merchants; 2) broker the products or services (i.e. add value and commission to the transaction); and 3) coordinate the logistics of delivering these products/services to the purchasing company (i.e. arranging the delivery and providing their own or affiliated transportation services).
B2C (Business-to-Consumer) Trading Company
B2C refers to selling products or services to the end client, and so the final destination of the trading company’s goods is usually a shop.
Planning a trading structure
When planning a B2B trading company, you should consider the following:
Taxation: The corporate income tax of your chosen jurisdiction will play a huge role in how you structure your business. You also need to think about withholding tax, payroll requirements, VAT registration (if located in the EU) and other tax issues.
Banks: A fast, easily reachable, convenient and trustworthy bank is essential for any trading company. Bank fees, commissions and, especially, the speed of transactions can be crucial for a trading business. We therefore recommend that you ask for our professional advice when choosing a bank for your company.
Legal and accounting requirements: While a prestigious company location may be important for your trading business, some of the most reputable jurisdictions impose excessive requirements on business owners. Contact Confidus to make sure you are aware of all legal and financial obligations before registering your company.
When planning a B2C Trading Company:
If you intend to sell your products or services locally, you will need to establish strong relationships with local advisors, real estate agents, accountants and other service providers within the jurisdiction where your company will trade. Confidus will help you with all the local arrangements, including:
Finding a location for your office, store or warehouse
Finding personnel and arranging recruitment
Finding a local accountant
When it comes to import/export operations, Confidus can also help with customs, warehouse arrangements and document preparation (sales and purchase agreements, CMRs, export declarations, etc).
https://www.confiduss.com/en/services/incorporation/purpose/trading/