Difference Between a Franchise & a Corporation

By Heather Frances J.D.

Many chain restaurants, hotels and retail stores are owned as franchises, meaning the parent company provides permission for the local owner to use the parent company's name and products. A franchise can be owned as a corporation, sole proprietorship, limited liability company or other business structure.

Franchises

Under a franchise arrangement, a person or company purchases the ability to run a local business under a larger company's brand. Depending on the franchise arrangement, the local party may have to meet certain standards established by the larger company and purchase products from the larger company as well. For example, a local fast food restaurant is likely owned by a local or regional company and operated under a franchise arrangement with a nationwide or international franchisor that owns the rights to the features of the franchise, such as recipes, employee uniforms, advertising and operations manuals.

Corporations

Franchises can be owned by any type of business structure, including a corporation. A corporation offers liability protection for its owners, called shareholders. Corporations must register with their state's business registration office and file annual reports. They must also hold periodic shareholder meetings and keep certain records as required by state law. Franchises can also be owned by other business structures, however, including a limited liability company. LLCs also offer liability protection, but generally require less paperwork.

Ready to incorporate your business? Get Started Now
Ready to incorporate your business? Get Started Now
How to Form an Umbrella Corporation
 

References

Related articles

Difference in Business License & Registering a Business

Starting a business can be complicated. In addition to hiring employees, finding a location and establishing clientele, new business owners must also ensure they properly register with government authorities and obtain all necessary government licenses. Without the proper registration and licensing, a business can face fines and penalties. Registration and licensing requirements vary between states and localities.

The Advantages of a Subsidiary Corporation

A subsidiary is a separate legal entity owned in whole or in part by another entity. Common forms include limited liability companies, C corporations and even nonprofits. Creating a subsidiary can be more complex than simply maintaining a single organization. It involves incorporating multiple organizations, maintaining separate financial records and even conducting arm's length transactions among entities within a single corporate family. Nonetheless, subsidiaries offer substantial strategic advantages.

How Do I Create an LLC Under an S Corp?

A limited liability company is an independent business entity that exists apart from its owners. There are no legal restrictions against another business owning an LLC. The Uniform Limited Liability Act, adopted in whole or in part in most states, allows any person to be an owner of an LLC. A person is defined as an individual or any other legal entity, such as a corporation, trust, estate or partnership. An S corporation, for instance, can spin off a product line into its own LLC, creating a subsidiary company where the S corporation is the sole owner.

LLCs, Corporations, Patents, Attorney Help

Related articles

Can I Have Many Businesses Under My Corporation?

A corporation is an independent legal entity that is formed under state law. It has an existence that is separate from ...

How to Start a Conglomerate Corporation

A corporation's status as a conglomerate comes from the way the corporation operates, not the way it is formed. A ...

What Does DBA Mean in Business?

In the business world, DBA - which stands for "doing business as" - is a vitally important acronym to know. It ...

How to Create a New Company or Subsidiary of an Existing Company

An existing company, or parent, can create a new company as an independent subsidiary at any time with the approval of ...

Browse by category
Ready to Begin? GET STARTED