Franchise News

Dedicated to helping you make an educated decision!

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Happy Summer,

I hope you are enjoying your family and taking time to smell the roses along the way!

I was traveling recently and had a wonderful conversation with a gentleman I was sitting next to in first class. (the joys of being a frequent flyer)

He asked me what I did and I explained that I was a franchise coach. I must admit that I am always surprised when someone says they never knew that someone like me existed - but that is another story. Here is what I found the most interesting about our conversation. He explained that when he was getting his Masters - one of his assignments was to investigate a small, medium and large size franchise company. What he found most interesting was that the companies didn't turn out to be at all what he thought they would be. Why is this important to understand? So many people make decisions about different companies without getting enough information. My clients hear me say to them, I don't want to know what you think but what you know!

Let men help you find the business of your dreams.

Your franchise coach,


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Choosing Business Structure

Which Business Structure Is Right For You?

While you are considering the purchase of a franchise, you should also begin a process, in parallel to your search, that addresses your financial and tax considerations. Your consultant will generally suggest you begin interviewing small business accountants and financial consultants so that you may have a relationship developed when you’re ready to start your business – but more importantly, so that you’ve had conversations with these experts that will allow you to think through various issues important to HOW you start up your business. If you wait until after you purchase your franchise to have these conversations, it may cause unnecessary delays in your ability to start up your business – and as you know, time is money in the world of business. These issues usually have to do with how you should structure your business, how you finance your purchase, and the tax implications of your franchise purchase. Only your accountant or financial consultant can best answer the latter two issues for you, but we can address structure for you here


The most common business entity structures are:

• Sole proprietorship

• Partnership

• Limited Partnership (LP)

• Limited Liability Corporation (LLC)

• S-Corporation

• C-Corporation

How do these structures compare? And on what factors do they differ?

The most common factors in which these structures differ is your company’s liability protection under each particular structure, and the tax requirements. There are also differences with regard to complexity and cost of formation, as seen in the following chart:



Formation Cost


Liability Protection

Sole Proprietor

Very Low

Low or Zero

1 level



Low or Very Low

Low or Zero

1 level


Limited Partnership



1 level





1 level

Good to Very Good


Medium to High

Medium to High

1 level

Good to very Good


Medium to High

Medium to High

Corporate (2tier)

Very Good

Most attorneys or accountants will tell you to consider an LLC, an S-Corp, or a C-Corp structure, as these offer your company greater protection against personal liability.

Right off the bat, you can see in the above chart, that C-Corp is somewhat less desirable from a tax perspective, but strong from a liability standpoint. Similarly, the most popular choices – the S-Corp and LLC -- seem absolutely comparable – but are they? The tie-breaker usually is something called “self-employment taxation.”

The Federal tax imposed if you are “self-employed” is 15.3%. (12.4% is Social Security tax paid on first $94K, and 2.9% is Medicare tax paid on all income.) And half of this self-employment tax is deductible on your personal return.

If you are an LLC, you are required to pay SE tax on the entire income generated by your business. An S Corporation only pays SE tax on the owner’s salary, not distributions. (Example: Against $100K in income, an LLC owner will pay about $43K in taxes while an S-Corporation owner will pay about $38K in taxes.) In addition, a S-Corporation allows owners to build a pension (412i) that can provide significant tax advantages as well as build personal equity.

Another important point to consider is that an LLC can often have advantages in cost of formation, i.e., there can be fewer documents required or a lower attorney fee, and can be slightly simpler to maintain. This tends to be a state-by-state consideration.

In net, it’s important to have your accountant compare the SE tax based on your business plan for either structure AND the comparative costs of formation in your state.

Other financial considerations you may want to discuss with both your consultant and your financial expert are impact on estate planning, timing of purchase (and the impact on franchise fee tax deductions,) and your exit strategy. The better and earlier you understand these basic financial issues, the more you can concentrate on building your business!

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Ready to explore the idea of business ownership. Click on the button and let's get started. Remember my service if FREE and worst case scenario you will get a great education about franchising.

Phyllis Pieri, CFE CCP

I use my passion for people and my 30+ years in the franchise industry to guide fledgling entrepreneurs through the franchise selection process. In my franchise career, I have done it all, including working for franchisors, consulting with franchisees, and owning franchises myself. This depth of experience makes me ideal for helping place new business owners in the right concept for them. I have trained a myriad of others, in the U.S., Canada, and the U.K. to use my tried and proven approach to franchise business selection.