McDonald’s is a well-known fast food restaurant with a global following. It is a huge corporation with more than 39,000 locations throughout more than 100 nations. Although McDonald’s is sometimes referred to as a franchise, the situation is a little more convoluted. Franchises are how McDonald’s functions as a business.
A corporation is a distinct legal entity from its owners. It is subject to its own legal obligations and rights. A corporation is able to enter into contracts, own assets, and bring or receive legal action. The McDonald’s brand is owned by McDonald’s Corporation. This indicates that the trademarks, recipes, and other intellectual property connected to the brand are owned by McDonald’s Corporation. The McDonald’s Corporation is in charge of the brand’s product development, marketing, and advertising.
Contrarily, a franchise is a form of business model in which a person or group of people (the franchisee) pay a fee to utilize the name and management style of an already-existing company (the franchisor). The franchisee is in charge of managing the company and following the rules established by the franchisor. McDonald’s is a franchise-based business, which means that anyone can open and run their own McDonald’s establishments using the McDonald’s name.
The franchisee’s lack of control over their firm is one of the key drawbacks of a franchise. Strict rules are established by the franchisor regarding how the firm should be handled, what products can be sold, and how to sell the brand. Even if they disagree with their own company objectives or ideas, the franchisee is required to abide by these rules. The franchisee must also continue to pay the franchisor ongoing fees, which can be expensive.
An investment holding company’s establishment is a difficult process that costs a lot of time and money. A business that owns and manages a portfolio of assets, including stocks, bonds, and real estate is known as an investment holding company. You must select a legal form, such as a corporation or limited liability company (LLC), and submit the required documents to the state in order to establish an investment holding company. Additionally, you’ll need to create a business strategy and secure any required licenses or permits.
Taxes must be paid by holding companies on all of their income. The holding company’s legal structure as well as the quantity of income received will affect how much tax is due. For instance, an LLC may be liable to pass-through taxation whereas a corporation may be subject to corporate income tax.
The enormous corporation Amazon conducts business through a number of subsidiaries and divisions. Amazon does not, however, have a conventional holding company. Instead, Amazon is set up as a parent company that owns and runs a number of subsidiaries, including Whole Foods Market and Amazon Web Services. Though they all have distinct operations, Amazon is ultimately the owner of all of these companies.
You would need to run your company as a sole proprietorship or general partnership as opposed to a corporation or LLC to avoid paying the $800 franchise tax. It is crucial to remember that there can be additional legal and tax ramifications to think about when selecting a business form. For advice on the optimal structure for your particular circumstance, it is preferable to speak with a lawyer or accountant.