Franchisee Tax Payments are the responsibility of the Franchised Outlet Not the Franchisor
A franchised business is much like an independent contractor situation. The franchisor allows the use of their brand-name, in a designated territory and following a particular method of doing business. The franchisee is responsible for all debts incurred in the operation of that business, and responsible for all tax payments that are owed. It is very important to insure that a government agency does not slapped a tax lien all the franchisor or that the franchisee does not shun their responsibilities, allowing any government agencies to assume that the franchisor owes this money.
It is for this reason that I modified our franchise agreements in my franchisee companies to include a clause that exactly states that the franchisee is responsible for all taxes incurred;.3.23 Taxes.Franchisee will promptly pay when due all applicable taxes and assessments against the premises and the equipment used in the Franchised Business and cause to be discharged all liens or encumbrances of every kind or character created or placed upon or against any of its property in accordance with the terms of any agreement, law, ordinance or court order imposing the same and all accounts and other indebtedness of every kind incurred by Franchisee in the conduct of the Franchised Business.
- - - - - - - - - - - - -.Most franchise agreements that I have seen to include such a clause, and you should know and understand if you are running a franchised company. It would be wise to contact a knowledgeable and experienced franchise attorney on of this matter, if you were unsure if your company is protected. Consider all this in 2006.
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