Investopedia explains 'Cost Company Arrangement'
The advantage of the cost company arrangement is that output is transfered at cost, without any mark-up. If there is no profit, then there are tax advantages. Also the participants don't need to worry about the antitrust implications of dividing up the profits. Additionally, the companies involved benefit from clearly defined control over the project, compared to a true joint venture.
However, a cost company arrangement can be hard to set up, especially in other countries because the host country will want to see some sort of profit realized so they can charge taxes.
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