How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask JGM Your Own Question
JGM, Solicitor
Category: Scots Law
Satisfied Customers: 11554
Experience:  30 years as a practising solicitor.
Type Your Scots Law Question Here...
JGM is online now

Franchise Question! If someone held a master licence for a

Resolved Question:

Franchise Question! If someone held a master licence for a franchise in a territory (Scotland) and was operating that areas as a sole trader - but then became sole owner of the parent franchise company (Ltd company) - would they be obligated to cancel the master licence agreement in Scotland.
As they would in effect be licensing themselves a territory which paid a nominal annual fee to the parent company and kept that element of business under the VAT threshold.

I am being told by one party that as it pre-dates the buy-in to the parent company it is still allowed, but in the same instance, if the scottish master licence began to trade under a Ltd company, that would in effect be breaking the company up and would fall foul of tax law.

Confused. Help?!
Submitted: 3 years ago.
Category: Scots Law
Expert:  JGM replied 3 years ago.
Thank you for your question.

There's nothing to stop someone having a limited company as one business and being a sole trader in another even if there is contractual relationship, such as a franchise, between the two.

The purpose of the businesses are separate. One is to hold a master franchise and the other is to operate a business under a franchise agreement. Both businesses pay taxes, I presume.

There is no obligation to cancel the franchise agreement and operate the sole trader business via the company or vice versa.

Happy to discuss further.

I hope this helps. Please leave a positive response so that I am credited for my time.
Customer: replied 3 years ago.

Thanks, XXXXX XXXXX be clear if I can,

Business 1 is a master licence for Scotland (sole trader)

Business 2 is the parent company, the franchisor.

Is there any difference if the master licence is carried out as a sole trader or Ltd company? And if that is the case, then that would mean I was allowed to essentially grant myself master licences for territories, paying the Main company an annual licence fee, but keeping the turnover in each territory below the VAT threshold?



Expert:  JGM replied 3 years ago.
No, it doesn't matter if one is a company and the other a sole trader. And you would not be granting yourself master licences. The company would be granting you master licences and the company is a separate legal person which was in existence prior to you purchasing it.
Customer: replied 3 years ago.

last one, promise -

And it wouldn't matter if the parent company was granting master licenses to another company, even if sole shareholder of both companies was the same person?

Expert:  JGM replied 3 years ago.
No, there's nothing to stop someone owning two companies which contract with each other.
JGM and other Scots Law Specialists are ready to help you