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Guidant’s Complete Guide to Buying a Franchise outlines what it means to be a franchise owner. We have broken down the guide into segments to give prospecting franchise owners an understanding of hidden costs, important documents, and the overall journey to franchise ownership. This introduction to the Guide is the first step.
The journey to becoming a business owner is exciting…but can be overwhelming at the same time. There are a variety of options and opportunities available to you – the world is your proverbial business oyster. This guide is designed to familiarize you with what it means to own a franchise, help you decide if being part of a franchise suits your goals and personality and take you through the ins-and-outs of the journey to franchise ownership.
A business entity is an organization created by an individual (you) that performs the actions of running a business. An entity can own property, receive a loan, enter into a contract and keep the individual legally separate from the business – among many other things. They have many benefits, but it’s the last one that is most often regarded when selecting the appropriate entity: how to best protect the individual from legal action or financial failure that the business may experience.
For example, the appropriate entity protects the owner from personal liability (like being sued) and their personal property (bank accounts, houses) from being seized in the event of the financial breakdown of the business. The tax implications of business entities are also far-reaching and are typically the other key element of selecting a business entity.
We’re about to jump into the different types of business entities, but first, a quick reminder that you should consult an expert when making a big decision like this, et cetera, et cetera. We’ll cover the basics in this chapter, but it by no means covers the complexities and nuances of business entities. A.k.a., talk to a pro before selecting your entity.
The most common types of business entities are C corporations, limited liability companies (LLC), S corporations and sole proprietorships.
C Corporations, commonly referred to as C corps, are the most frequently used entity in the United States. With a C corp, you can grow your business through the sale of stock – and there is no limit to the number of stockholders. So, bonus.
An S corp is pretty similar to a C corp, mainly in the limited liability and perpetual existence sectors. But, of course, there are some major differences in the areas of tax implications and limited shareholder growth. So, don’t be surprised when the pros and cons lists below look pretty darn similar to what you’ve just read above.
An LLC is another super popular option because it is the most simple (and by that we mean the least complex, because let’s face it, all of this stuff is complicated). It comes with many of the perks of C and S corps, and you get to have a little string of letters following your company title, which is always a bonus.
The sole proprietorship is the simplest entity that can be used to operate a business. It itself is not a legal entity, which means losses and income are included on your personal tax return. The simplicity makes it a popular option, as well as the minimal setup fees.
This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your jurisdiction. Franchise offerings are made by Franchise Disclosure Document only.
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