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Business Entities, Laws, & Regulations Paper

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Business Entities, Laws, and Regulations Paper Pg. 1

Business Entities, Laws, and Regulations Paper


October 10, 2011

Business Entities, Laws, and Regulations Paper Pg. 2

In order to run and maintain a successful business in a super fast growing economy than the business owners needs to make sure that they have a lot of information that is right there at their finger tips. If a business is not able to provide their management with this kind of information then their business might be at risk for failure.

The business entity that would be most fitting for Frank to be able to establish his plans of opening up a chain of exterminating businesses would be to purchase an established franchise. Opening up a franchise would let Frank be able to use the trade name as well as any trademarks, symbols, patents, copyrights, or any other right to the distribution of the franchises services and products. There is also another advantage of having a very established business; it enables you to reach out to new markets that are very profitable. At the same time, Frank will need to go and license all of his chains to make it legal for him using the franchised products.

The franchisee and franchisor are separate entities and the agreement that happened between these two sets all of the conditions and terms that Frank needs to meet. Although it is quite costly when entering into a franchise, Frank does have all of the funds available to make the franchise run.

With Frank being accepted into the franchise he will need to check with the State Envirnomental Protection Agency to make sure and conform to the states certifications and all the requirements for licensing for extermiantors, along with finding out the regulations from the Federal EPA pesticide. Frank needs to make sure that he has certified employees that are very knowledgeable in the proper way of using chemicals safely.

There is also a franchise tax that is a business tax that is based off of the corporation's assets. Every single corporation is required by law to file the franchise tax. Most of the franchises all operate as separate entities, and they all file taxes that are based on the individuals franchise profits. All of the entities that are formed as corporations under civil law and also the LLC's that choose to be taxable

Business Entities, Laws, and Regulations Paper Pg. 3

as a C Corporation are all subject to a minimum tax rate. Franchise's have state taxes that vary depending upon which state they are in. C Corporation have taxes that are based upon the franchise's net income at a certain rate that is specified according to the state percentages. Frank has liability issues that he should take into consideration as a separate entity from the franchisor and that would be the liability for any contracts or torts of the employee. Frank will have liabilities that he will need to cover with his insurance for employee and employer coverage, disability, commercial, product liability, and personal injury, and the list goes on. The Federal Trade Commission is responsible for all of the franchise regulations as well as making sure that they are effective. State policies all incorporate the Federal Trade Commission's regulations, but then there are some states that require additional requirements such as additional forms that are needed to be file to the franchise. The Federal Trade Commission's disclosure rule does require a franchisor to have potential investors with a disclosure document that has the future earnings, and forecasts important information of the disclosure paperwork. Additional items needed would be fictitious names of the franchisor, as well as any trademarks that are associated with the franchisor, any settlement of a legal suit involving any kind or fraud of bankruptcy. The FTC rule does require disclosure only, this documentation is considered the big indicator of where the franchise stands.

Some of the risks that Frank will face and need to come up with decisions are building a new place or purchasing an existing location. Being able to have the franchise reports of all the financial statements, the franchisor, the sales tax returns, and also the federal and state income tax returns will be able to help find any problems of things



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