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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4779
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I run a company that is setting up franchises in the UK and

Customer Question

I run a company that is setting up franchises in the UK and abroad. I want to create a mechanism that will pay my franchisees a bonus based on their sales volume but only in the event of a sale of the business in 10 years time.

My question is how can I construct this agreement to avoid having this as a liability in my accounts. There is no way of predicting what the sales will be or what a sale price would be.

As an alternative can I grant options redeemable in 10 years time based on each franchisees sales as a percentage of the total?
Submitted: 4 years ago.
Category: Tax
Expert:  bigduckontax replied 4 years ago.
Hello, I'm Keith and happy to help you with your question.

The solution is not to make the bonus a condition of the franchise. Thus no deferred sums would exist in the account

I wound not even dream of options. You would be creating a nightmare and uncontrollable world which would leave your organisation wide open to litigation from disgruntled franchisees at some indeterminate future date.