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Business Entities: Should Franchisees Incorporate?

When you’re signing your franchise agreement, (your contract with the franchisor) you’re going to notice a spot on the contract that asks for your official business name and entity. If you didn’t bother to set these things up, you’re blood pressure could start to rise.

But, that won’t happen to you. That’s because you have read lots of franchise articles, so you’re prepared. Like the one below, which features my interview with Nellie Akalp, the CEO of CorpNet® Incorporation Services

(This post may contain affiliate links. Please read my disclosure policy).

CorpNet Founder, Nellie Akalp
(Nellie Akalp)


Business Entities: Should Franchisees Incorporate?


1. Should people that are buying franchises wait until they’re business entity is set up before they sign any franchise documents?

Nellie: Absolutely, it’s always best to set up your legal entity as a corp or an LLC and get your legal ducks in a row before you sign any agreements under the franchise as a franchisee.

2. If someone wants CorpNet to help them set up a corporation in a state that their business isn’t located in, (because they’ve “heard” things about Delaware…Wyoming, etc. ) what do you tell them?

Nellie: As a general rule of thumb, if your corporation or LLC will have fewer than five shareholders or members (a condition which applies to the bulk of small businesses), it’s best to incorporate or form an LLC in the state where your business has a physical presence. This means the state where your business is physically located, where any property owned is located, where your employees reside and where the shareholders reside.  In other words, unless your business has a physical office in Delaware or Nevada, it’s much easier and less expensive in the long run to incorporate or form an LLC in your home state.

For example, when a business incorporates “Out of State” (for instance, in Delaware), there may be additional filings and fees in both the state of incorporation as well as the state where the entrepreneur lives and runs the business. These can include:

For the state where a business incorporates:

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•Appointing a Registered Agent in that state

•Paying filing fees in that state

•Filing annual reports in that state

And then, for the state of residence (where the business is physically located):

•Appointing a Registered Agent in this state

•Paying filing fees in this state

•Filing annual reports in this state

•Qualifying as a Foreign Corporation in this state

•Paying taxes in this state

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3.  If a prospective franchisee wants his or her lawyer involved in your process, are you comfortable with that? Any examples of how that’s gone in the past-with franchisee or non-franchisee clients of Corpnet’s? 

Nellie:  We actually welcome that as 50% of our clientele are lawyers and accountants and we service their clientele by working with the lawyer/accountant directly and enjoy it.  We do not consider ourselves competition for lawyers or accountants; we consider ourselves their silent fulfillment partners and work with them to service their clients’ needs. It’s especially a win-win with lawyers because we save them the hassle of doing the paperwork and also they get to save their client money so the clients will use that lawyer more often.

4. Can you help current franchisees change business entities?

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Nellie: Absolutely! The process to change a business entity depends on the type of entity a franchisee is currently.  If the franchisee is currently a DBA and wants to Inc or LLC, then you simply incorporate your franchise or from an LLC. If the franchisee is currently a corporation or an LLC and wants to switch from one from of business entity to another, then its by way of a conversion and very easy to do so, but requires a filing with the state office and filings fees to the state which varies from state to state.

5.  Why does Corpnet rock?

Nellie: When you choose us to help you start a business and incorporate your company, you don’t just get an incorporation filing. You get SO much more including:

  • A team of top business formation experts managing document filings according to industry-leading best practices: CorpNet has an in-house team of business consultants who will help you navigate the complexities of incorporating a company. You don’t have to figure it out on your own. You don’t have to worry about filling out the wrong form or exposing your company to potential difficulties. We take care of all the details, the hassles and the “legwork” for you. Hiring CorpNet (instead of trying to incorporate a business by yourself) is like the difference between relaxing in your first-class airplane seat and trying to fly the plane!
  • A decade of business formation experience and industry stability: There are no “newbies” on our team. We’ve been doing this for years, and we’ve helped thousands of entrepreneurs start a business. No matter what situation you’re facing with your business incorporation needs, we’ve done it before.
  • Unlimited Live Customer Service Support: Starting with a Free Business Consultation, CorpNet pulls out ALL the stops to make sure you get the support you need, at every step of the process. No other incorporation service has friendlier, more helpful people who are more generous with their time. We make every effort to guide our customers through the process of starting a business – with no delays, no confusion, and no unpleasant surprises.

CorpNet outshines other providers as we believe that we offer the best package of incorporation services, with the most friendly and detail-oriented support, with the most reliable delivery of business filings – all at unbeatable prices.. which is why WE ROCK! — Nellie Akalp

Thanks, Nellie!


Do you feel more prepared?

Set-up your business now—before you sign on the dotted line!

Incorporate or Form an LLC in minutes.


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I'm The Franchise King®, Joel Libava. I help prospective franchise owners avoid bank account emptying mistakes. For over 20 years, I’ve been helping people make smart, informed decisions on franchises to buy, and I can help you, too! #thefranchiseking
The fantastic thing about Joel is his neutrality. Because he is not getting an incentive fee, he will always give you the advice that you need (even if not what you necessarily want) and that's pretty unique these days. Thank you Joel!"
- Nic Church, France
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