Franchise

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
I need a bit of info. A friend of mine is buying a franchise of a Limited company, would they operate as a sole trader or as a limited company? Also he wants to put his girlfriend down as part of the company but she already has a full time job and won't be getting a wage from the franchise so they want to avoid any tax implications, would she go down as a Secretary or how can they do this?<BR><BR>Any help would be much appreciated.<BR><BR>Thank you.<BR><BR>Leanne<BR>

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    Hi Leanne,<BR><BR>Sometimes, the Franchisor expects the Franchisee to pay a personal bond, but it depends on the investments the Franchisee will be putting into the business whether or not they should trade as a sole trader or go for the greater expense/security of a company.<BR><BR>Who will be buying the stock? Companies like shell pay for the stock.<BR><BR>Basically he needs to quantify what he would risk if it went belly up.<BR><BR>As for his girlfriend - I canâ??t see why he needâ??s his girlfriend as a part of the business. Does he need her to fulfil the role of Director?<BR>
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    Hi<BR><BR>Thanks for you reply.<BR><BR>The franchisee will be paying for the stock, and he will be buying the franchise with the goodwill etc. for the existing customers.<BR><BR>He wanted to put his girlfriend down as part of the company as it will be her family that are stumping up the money to buy the franchise!!<BR><BR>Leanne
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    Hi Leanne,<BR><BR>Without knowing much about the franchise, another good indicator would be if the existing Franchisee operated as a company or sole trader. <BR><BR>An advantage of setting up a limited company would be the ability to transfer partial ownership of a company to the girlfriend, unless there is some obligation to repay the girlfriend's parents back the capital.<BR><BR>As you need at least two directors when forming a company, his girlfriend could be one. Any unpaid title within a sole trader operation would likely to be meaningless, unless she worked on the books or some other active role.<BR><BR>Best of luck to them! <BR>
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    You actually only need one director but you also need a company secretary who cannot be the same person.<BR>You may like to consider the girlfriend becoming a shareholder. Perhaps the monies being introduced should be share capital? You have a lot to consider here.<BR><BR>Having been seen many franchise operations though here is a word of caution. Most make very little money for the franchisee and a lot for the franchisor. Read the terms very carefully and be sure that this is a viable business before even thinking about how to structure it.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    <br><br><< <i>You actually only need one director </i> >><br><br><BR><BR>Ah, I'm guessing UK law is different in this respect to ROI company law, then.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Franchise

    There is a lot to consider, thank you to everyone for replying you've all helped us a lot.<BR><BR>Thanks again.<BR><BR>Leanne

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