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Questions on Purchase on a Small Business

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,

Reply to
Juliee
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franchisor company directly.

Second split that the Company made of the purchase price ie 40% going to franchise fees.

transaction with respect to taxes and if there is anything that I should keep in mind.

Just to clarify, you are not buying ownership of a business entity, you are buying the assets directly. Right?

The tax treatment of the franchise fees depends upon the period of time they cover.

Reply to
Bill Brown

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