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Franchise Business Structure

In creating the business structure for the franchise there are several considerations to take note of depending on the type of franchise you plan on running and how you plan to run it.

When you start a business you come up with a business plan from which you create the overall structure of how you will run your business.

Same goes with the business structure. It is basically the framework of your business with this it is best to assess the details with the appropriate legal counsel to ensure the legalities of all the details. As with a regular business, the franchises have their own type of business structure. There are three types of business structures which include the partnership, sole trader and the proprietary limited company. These business structures are applicable to any business owners interested in franchising their businesses.

The recent development of these forms is the LLP or limited liability partnership and LLC or Limited Liability Company. Each business comes with their own specific structures and business forms which will depend solely on the business owners and their plans for the company in totality since these specifications should match the company’s needs.

Sole proprietorship is the simplest structure and comprises of just the individual that is both owner as well as manager of the business. The tax specifics of this type of business structure are appealing in the sense that these figures are inclusive of your personal income tax return. You get to pay annual self employment taxes as well as federal taxes only being taxed once as compared to the other main business structures. Also, another big advantage is that you get to manage and control your business completely making all the necessary advancements, changes and overall decisions of the company. This also means though that the owner is also responsible for all the company’s liabilities therefore placing assets at risk of seizure or legal claims.

In a partnership the business is owned or operated by several other people. There are two types of partnerships which are the limited partnerships and general partnerships. In limited partnerships you have the general as well as the limited partners with whom the general partners run the business and the limited partners serve merely as investors. In a general partnership however the partners manage the company and are responsible for the partnership including its liabilities and debts. Therefore if you are interested in engaging in a partnership type of business structure the general partnership would be the best option as compared to a limited partnership. In a partnership you get the advantage of not being taxed based on income rather losses and profits are passed through the individual partners.

In a corporate business structure you have a legal identity that is independent and therefore needs to comply with more tax requirements. With this however the business owner can incorporate liability protection therefore not putting any personal assets at risk.

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2 Comments

  • kishan chaudhary said on January 20, 2014
    sir. i am interested grocery store franchise. so plz develop franchise consultancy provide me. thanks
  • Digvijay Lohate said on May 3, 2017
    plz give me franchise

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