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Can two people share a franchise?
In practice, there are a number of ways that two people can share a franchise. Firstly, both individuals can sign the franchise agreement in their personal capacity. This approach means that the individuals are personally liable under the franchise agreement. This arrangement will also create a legal partnership, meaning that either person can be sued for the other’s acts in relation to the franchise.A second way is for the individuals to set up and own the shares in a company or limited liability partnership, with the company or LLP entering into the franchise agreement instead of the individuals themselves. The advantage of this is that, except in limited circumstances, the company/ LLP will be liable for the franchise and not the individuals personally. However, many franchisors will try to get around this by requiring the individuals to personally guarantee the company/LLP’s obligations and liabilities - in effect putting each shareholder/partner in the same position as if they had signed the franchise agreement in their personal capacity.It is also worth noting that individuals, companies and LLPs are taxed differently, so you should seek advice from a lawyer or accountant to see which method suits you best.
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