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
Difference in Business License & Registering a Business

References

Related articles

Sole Proprietorship in Charlotte, NC

Sole proprietorships are a common business structure because they are relatively simple to set up, and provide for flexibility in management. Generally, business formation and registration is handled by the secretary of state's office, while local offices handle business name registration and local licensing. A sole proprietor does not have to register or file formation paperwork if the business is filed under the owner's name. There are specific filing requirements, however, for sole proprietorships doing business in the city of Charlotte, and for sole proprietorships that use an assumed name, hire employees or collect sales tax.

What Is an LLC License?

A limited liability company is a type of business structure that shields the owners of the company from personal liability for the financial dealings of the operation. An LLC does not pay federal taxes since the profits are only reported on the owner's tax return as personal income. The creation of an LLC is governed by state law and members must file certain documents with the appropriate state department to gain approval to operate as an LLC.

What Is the Difference Between a Solo Practice & a Sole Proprietorship?

Selecting the legal structure of a business is one of the first and most important decisions that a new business owner can make. It can dictate the number of owners in the business, the level of formality of the organization and has many important tax consequences. The simplest form of business is the sole proprietorship since it does not involve multiple owners, has simple tax treatment and does not require formal state filings prior to start-up like a corporation or limited liability company. Solo practices in various professions are not restricted to a specific form of business structure; the term solo practice simply indicates that there is a single professional in the practice.

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 ...

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 ...

Parent LLC Vs. Stand-Alone LLC

A limited liability company protects its members from liability for business debts. The LLC also provides a simple tax ...

What Is a Disadvantage of the Corporate Form of Business Entity?

Compared to other business entities, corporations offer many advantages, such as liability protection and ease of ...

Browse by category
Ready to Begin? GET STARTED