I am in the process of buying a few outlets of a franchised business from the franchisor company directly.
We had come to an agreement on price. The price was to be split between 1. Fixtures, Fittings and Equipment (FF&E) and 2. the balance would be Goodwill.
Then they split the purchase price in the agreement into 1. the Franchise fees (40%) and 2. the balance (60%) as purchase price. - Fixtures, Fittings and Equipment (FF&E) - and whatever is not FF&E will be Goodwill.
I am wondering if there are any negative tax ramifications of the above Second split that the Company made of the purchase price ie 40% going to franchise fees.
Can anyone please let me know.
Also please let me know what is the best way to structure such a purchase / transaction with respect to taxes and if there is anything that I should keep in mind.
Thanks,