Different Ways to Register a Business When Buying a Franchise

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Table of Contents

• Sole Trader
• Partnership
• Company
• Key Takeaways

Starting a franchise in Australia is an exciting venture that offers the opportunity to become a business owner while benefiting from an established brand and support system. One of the essential steps in the process is registering your business. There are various ways to register a business when buying a franchise. This article explores the different options when registering a franchise business.

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Sole Trader

Registering as a sole trader is one of the simplest and most common ways to start a franchise in Australia. As a sole trader, you operate the business as an individual without forming a separate legal entity. This option is straightforward and cost-effective. To register as a sole trader, you must:

1. choose a business name – this may include the name of the franchise followed by the territory;
2. register for an Australian Business Number (ABN) – you can apply for an ABN online through the Australian Business Register (ABR) website; and
3. register for Goods and Services Tax (GST) if your franchise’s annual turnover exceeds the GST threshold (currently $75,000).

Partnership

You can form a partnership if you are starting a franchise with a business partner. A partnership is a legal structure where two or more individuals run a business together, sharing responsibilities and profits. Partnerships are similar to being a sole trader. However, rather than one individual bearing legal and financial, it is shared between two or more people.

To register a partnership, you can follow the same steps above, that is:

1. choose a business name;
2. register for an ABN; and
3. register for GST.

However, it is highly recommended you and your partner draft and enter a partnership agreement that clearly outlines the roles, responsibilities and arrangements between each individual in the partnership.

Company

Setting up a company is a more complex but often a preferred structure for franchises, as it provides limited liability protection. This means your personal assets generally receive protection if the business faces financial difficulties. To register a company, you must follow the following steps:

1. choose a company name – ensure the name is available and does not infringe on existing trademarks. This may include the name of the franchise;
2. register the company on the ASIC portal – you will need to pay registration fees and potentially professional fees if you get a lawyer to correctly prepare this for you;
3. register for an ABN with the ATO; and
4. register for GST if the annual turnover exceeds the threshold.

There are various advantages to establishing a corporate entity before entering into a franchise agreement. 

Due to the various benefits of registering a company, franchisees usually opt for company structures. However, despite the limited liability protection of companies, directors and shareholders of a company may still be required to act as guarantors in franchise agreements, which deems this benefit somewhat redundant.

Key Takeaways

There are various options when looking to register a business to buy a franchise in Australia, each with its advantages and disadvantages. Whether you opt for a sole trader, partnership or company structure depends on factors such as your business goals, personal preferences, and the franchise’s nature. Before deciding, it is crucial to seek legal and financial advice to understand the implications of each registration option. 

If you are looking to register your franchise business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.