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Tim S.
Tim S.
Taren Point, NSW
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Hi, I would like to ask a question about buying a franchise/licence. The parent company is not calling it a franchise (just a licence) but the agreement looks and feels like a franchise and we have to commit to KPI’s and a 3 year term. If it is just a licence agreement does that mean the parent company is required to pay tax on our behalf or is that our responsibility – thank you?

3 months ago

Responses

Hi Tim,

Regarding the agreement, I’d suggest you get it in front of a lawyer that covers contracts and understands fully the franchise rules.
Regarding the tax, that is certainly your responsibility as a business owner. Get in front of an accountant with business focus, get the right structure for your business and circumstances. A bit of cost now can save thousands each year in tax!
Good luck with the business.

Hi Tim,
I agree with Todd, you are definitely the only person responsible for the tax obligations of your business.
In regards to a franchise or licence agreement they are legally the same thing really. There will be stipulated rights and responsibilities and a fee to be paid for the privilege.
Definitely get a lawyer to look over the contract. Whilst there may be nothing that you can change, it is still important to understand each clause and condition and what impact or consequence each one has on you now and into the future. These would include succession and sale of the business as well because you want to know how to exit very clearly before you make the commitment to join the group
Best of luck

Scott

Hi tim,

I think if it walks like a duck and quacks like a duck then its probably a duck.

so if you reckon its a franchise agreement you are probably right.

and the other guys are spot on about getting advice from a good solicitor and a good accountant. not only do you have to get a clear picture of your obligations under this agreement, you need to get advice on what is the best structure to conduct your business.......you can operate the franchise as a sole trader, partnership, trust or company.......and each option has pros and cons.....so I STRONGLY advise you to talk to a good accountant about the business structure (if you have not already done so).......best aim for someone with some letters such as CPA or CA after their name.

and good luck with the franchise.......I hope it goes well for you, but dont make the assumption that the franchise is a big happy family there to support you, because I have seen some absolute disasters arise from a franchise which went sour, and it generally starts with the franchisee not knowing enough about what his obligations were under the franchise agreement.

cheers
bc

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