1. After discussing about franchising costs and used Freddy’s as an example. Pick another company that franchises and search the information on opening a franchise. Include costs, up-front cash required, royalty (profits paid to franchiser), and any other important information.
2. consider and answer the following on how profit(loss) is allocated per entity.
The entity in question earned $1 million in profits for the fiscal year. Discuss how this profit is allocated with the following entities:
1. Sole Proprietor, who receives this profit?
2. Partnership, two partners, no agreement on profit(loss) allocation regarding the $1 million in profit for this fiscal year. How would you suggest a ‘reasonable allocation’ be for the distribution of profit(loss) be for the partner in charge of operations be versus the ‘capital partner?
3. Corporations, who gets the profits in a corporate form? Would a corporation be required to distribute profits, if not, then who gets the profits? perhaps the reason for the account ‘retained earnings.
4. Limited Liability Company (don’t consider the ‘S’ corporation for this, who gets the $1 million in profit for this ‘pass through’ entity? You can assume that there was a managing partner, and 9 such limited partners. Let’s have the managing partner, operations partner work for a salary. If the entity turns in a profit, then the managing, operations partner will share equally with the limited partners.
