Section Five: Creating a Partnership, Franchise and Sole Proprietorship

Procedure for Partnership

The easiest way of creating a partnership is by entering into a written partnership agreement and filing the appropriate form with the Provincial government. To form a partnership, two or more people must agree that they are carrying on a business with a view to making and sharing the profit.

Organization of Partnership

Where there are more than two partners, the role of the partners ought to be outlined.

Control of the Partnership

If there are only two partners, both partners may be equal in terms of decision making authority.

The partnership may be formed between a large number of individuals. In that case, it is advisable that the partnership appoint an executive committee to make the crucial decisions for the partnership. In some cases, a single individual partner is named as the managing partner.

Partnership Agreements

It is strongly recommended that partners obtain a Partnership Agreement.

A Partnership Agreement deals with the same items as provided for in a Shareholder Agreement.

Franchisor Obligations and Rights

It is important when entering into a franchise that the franchisor’s obligations and rights are clearly stated in the Franchise Agreement.

What is it that the franchisor is providing? Use of a mark? Use of a trade practice or procedure? Use of a process?

The right to purchase a product? Management services? Marketing expertise?

Franchisee Obligations and Rights

What does the franchisee have to do to obtain the services of the franchisor?

Normally, there is both a franchise fee and a periodic royalty payable to the franchisor.

In some circumstances, the franchisee is required to purchase the product from the franchisor.

These rights and obligations must be set out in the Franchise Agreement.

Creation of a Sole Proprietorship

Unless required by legislation, and unless the sole proprietor is using a name other than his or her own legal name, there is no requirement to register a sole proprietorship.

However, if you wish to use a business name other than your own, it is best to register the name with the Provincial government, to open a bank account in the business name and obtain cheques and credit in the name of the business.

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