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JGM, Solicitor
Category: Scots Law
Satisfied Customers: 12198
Experience:  30 years as a practising solicitor.
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Franchise Question! If someone held a master licence for a

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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?!
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 4 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?



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 4 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?

No, there's nothing to stop someone owning two companies which contract with each other.
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