Opportunities and Expansion For Your Business

Welcome to August! This is the month to consider opportunities & expansion in all aspects of your business. Are you aware of what is possible? Do you know the first steps to take to make sure you achieve your vision and not a nightmare?

Learn what is possible. Then maybe start the process to get your business ready to license, franchise, sell or to bring in investors or partners. Otherwise, understand what is possible, then maybe just making sure both you personally and your business are protected while you get ready to take next steps. Today, we are going to walk you through shareholders vs lenders, employee vs contractors and franchising vs licensing so you know what is possible for you.

Shareholders vs Lenders

If you are looking for some external assistance with your business, be it financially or experientially, you may be looking into having shareholders or lenders to your business.

In business, a shareholder is a person, company or institution that owns at least one share of a company’s stock (or in a mutual fund). In essence, they own the company – to the extent of their share ownership. With this ownership comes rights and responsibilities for the business, and often allows them to reap the rewards if a business is successful. With this stake in a company, they may reap rewards, but they do not need to be paid by a business. On the other hand, a lender or creditor to a business must be repaid. A lender is an individual, public or private group, or financial institution that makes funds available to a person/business. They do not have any ownership, however, have an expectation of these funds lent being repaid in a certain amount of time, usually accruing interest. As a business, it’s important you account for these financing options differently in your statements.

Employees vs Contractors

Running a business may mean you require assistance and expertise with the addition of other people to your team. Knowing the difference between an employee and a contractor can help you make the decision of who to engage in services.

An employee works in your business as a part of it. They cannot subcontract or delegate work, are paid for their time worked/price per item or activity or on commission, and are provided all equipment, tools and assets by the company or business. The employee takes no commercial risks with the business being legally responsible and liable for all work completed by the employee. The business has the right to direct the way in which the worker completes their work, and does not work independently of the business.

On the other hand, a contractor is running their own business. They have the ability to subcontract and delegate if they wish, are paid for a result achieved based on a provided quote, and must provide their own equipment, tools and assets. They take their own commercial risks and are legally responsible and liable for their own work, and have complete control over the way in which they do their work. Contractors are entirely independent and perform services only specified in their contract or agreement, meaning they are free to accept or refuse any work offered to them.

Franchising vs Licensing

Both business agreements in which brand aspects are exchanged for a fee, the difference between franchising and licensing can be difficult to comprehend. When it comes to businesses that are looking to expand in these ways, knowing the differences between the two is imperative to getting the results you want.

A franchise is a business agreement between franchisor (business owner) and franchisee (who receives the rights to the brand including products, services, and IP). The franchisee will open a separate branch under the brand’s name, in essence duplicating the business. Depending on the agreement, the franchisee will usually pay fees to the franchisor to use the brand and receive advice and business support. The franchisor retains control over their brand. Franchises are usually used for service-based businesses. For product-based businesses, licensing agreements usually are the preferred option. These are limited, legal business relationships where a specific party is granted rights to use certain registered trademarks only from a brand. The licensor (trademark owner) sells the rights to the licensee for a royalty fee.

If you would like some further legal business assistance, book in a free Discovery Call or a Strategy Session with us here at Advantage Partners Lawyers to ensure you are making the right choices for your business.

Please note that this is a general and brief update, it does not purport to be comprehensive legal advice of all information and/or relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.