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Choosing a preferred business structure in Michigan

| Feb 23, 2015 | Business Formation & Planning |

Individuals who are interested in acquiring a business may choose to buy or create their own independent company or to purchase a franchise. One advantage to starting or buying an independent company is that an individual can run the business however he or she chooses. On the other hand, a franchise owner has the ability to rely on the parent corporation for materials and brand recognition.

Another advantage to running an independent company is that the business owner can make decisions based on available cash flow. For instance, it may be possible to delay expansion until more money is available. A franchise owner may have to remodel or expand based on a timetable provided by the parent company. In addition, a franchise owner may need to pay royalties, which could erode profits and profit margin.

One issue that may not come into pay is the success rate of a franchise versus the success rate of an independent company. There is little research indicating that one is necessarily better for the other. Ideally, someone who wishes to start a company will do an independent analysis of the underlying market conditions as well as the ease of financing the acquisition before starting operations. The decision may also come down to whether or not an individual is willing to trade control for access to materials and guidance.

Business owners who are trying to decide how to run their organization may wish to talk to a business-planning attorney. A business law attorney may be able to provide advice regarding what it may take to buy a franchise versus what it may take to buy or start an independent business. Legal counsel may also be able to provide information about limiting liability and how to create an effective partnership.