Franchise, sole proprietorship or corporation: which do I choose? There are many business entities to choose from when starting and operating a business. How does one choose the best fit for their goals and the goals of their new business? Well to answer these questions we must discuss the various business entities as well as laws that govern many aspects of business interactions with individuals and specifically with other businesses. These laws are referred to as agency laws.
Barnes, Dwarkin, and Richards (2003) stated Agency law addresses three basic but fundamental questions:
1.What duties do a principal and an agent owe each other?
2.What is the liability of the principal and the agent on contracts made by the agent?
3.When is the principle liable for the torts of the agent?
Answering these questions is critical for clarity in business transactions that occur between two entities. These are the cornerstones on which the business world is built upon.
Without these guiding principles many obligations to either the agent or the principal may go unfulfilled. The days of a handshake and a promise are over. The business environment relies heavily on such duties to run successful and profitable operations.
Owning a business, organization or franchise is not as simple as one might assume. There are many things to consider when opening a business - the first and most important choice to make is what form of business - or what type of business entity - the company will take. There are approximately six forms of business entities that are most commonly undertaken and these are: sole proprietorships, limited and general partnerships, publicly held or close corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), and franchises.
A sole proprietorship is a business that is owned by one...