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Forbes
09-07-2025
- Business
- Forbes
The Dark Side Of International Franchising: 4 Legal Pitfalls To Avoid
Mohaimina Haque, CEO at Tony Roma's. Attorney & General Counsel. Immigration, Business Law expert. Adjunct Law Professor. International franchising represents one of the most attractive pathways for rapid global expansion. The allure is undeniable: leverage local capital and expertise to build your brand across continents while generating substantial revenue streams. However, beneath this attractive surface lies a complex web of legal challenges that can not only derail your expansion plans but potentially destroy your entire brand if not properly navigated. As CEO of a major restaurant franchise and a practicing attorney, I've witnessed firsthand how legal oversights in international franchising can transform promising global expansions into costly disasters. Leading a company where my predecessors were eager to enter international markets has given me a unique vantage point. What I've realized is that no one wants to think about legal complexities when they're rushing to sign deals and capture global opportunities. But these challenges are real, and can have a disastrous impact on brands worldwide. Protection begins with understanding these four legal realities: The Intellectual Property Mirage: Why Registration Isn't Protection Many franchisors make a critical error by assuming that intellectual property protection begins and ends with trademark registration. Intellectual property protection in international franchising is a multifaceted challenge that extends far beyond simple registration. While securing your trademarks, copyrights and trade secrets in target jurisdictions is essential, true protection requires a comprehensive strategy that anticipates enforcement challenges, local legal variations and the realities of operating in diverse legal systems. In my experience, most international IP laws are specifically designed to protect local businesses, often at the expense of foreign brands. This creates an inherent disadvantage that many American companies discover too late. Local competitors can exploit regulatory loopholes, cultural differences and bureaucratic delays to their advantage, sometimes operating copycat businesses for years before any meaningful legal recourse is available. The Capital Fraud Trap: When Franchisees Become Con Artists One of the most insidious challenges in international franchising involves franchisees who view your brand not as a business opportunity, but as a fundraising tool. These sophisticated operators understand that securing franchise rights from an established American brand provides immediate credibility with investors, banks and potential partners in their home markets. The scheme is elegantly simple and devastatingly effective. They sign franchise agreements with no intention of developing the business according to your standards or timeline. Instead, they leverage your brand's reputation to raise capital for entirely different ventures, often in unrelated industries. By the time you realize what's happening, they've extracted substantial value from your brand while providing nothing in return. This type of fraud is particularly challenging to detect and prevent because these individuals often present impeccable credentials, demonstrate apparent financial capacity and express genuine enthusiasm for your brand. They understand exactly what franchisors want to hear and are skilled at providing convincing business plans and financial projections. The Jurisdiction Trap: When Legal Agreements Become Worthless The enforceability of franchise agreements varies dramatically across jurisdictions, and many franchisors discover too late that their carefully crafted contracts are essentially worthless in certain markets. This is particularly true regarding termination clauses and dispute resolution mechanisms. Unilateral termination rights that seem ironclad under U.S. law may be completely unenforceable in jurisdictions that prioritize franchisee protection or have different concepts of commercial fairness. Some countries have specific legislation that supersedes private contractual arrangements, effectively nullifying termination clauses regardless of the circumstances that trigger them. The choice of governing law and jurisdiction clauses that American companies typically favor may be rejected by foreign courts, forcing you into legal systems where you lack expertise, relationships and sometimes even basic procedural understanding. This jurisdictional uncertainty creates an environment where problematic franchisees can operate with impunity, knowing that enforcement action is practically impossible. The Copycat Conundrum: When Local Laws Protect Your Competitors Perhaps the most frustrating aspect of international franchising involves dealing with local copycat operations that exploit legal protections designed for domestic businesses. These competitors often operate with striking similarity to your brand—similar names, logos, menu items or service offerings—while remaining technically compliant with local intellectual property laws. The challenge is compounded by the fact that many jurisdictions have weak enforcement mechanisms for intellectual property violations, lengthy legal processes that favor defendants and cultural attitudes that view imitation as legitimate competition rather than theft. Building a successful case against copycats often requires years of litigation, substantial financial investment, and outcomes that remain uncertain even with strong legal positions. The bottom line? International franchising offers tremendous opportunities for growth and revenue diversification, but success requires treating legal challenges as strategic considerations rather than operational obstacles. The companies that thrive in international markets are those that build legal resilience into their expansion strategies from the beginning, rather than attempting to retrofit legal solutions after problems emerge. The investment in comprehensive legal planning may seem substantial up front, but it pales in comparison to the costs of dealing with problematic franchisees, intellectual property theft, or jurisdiction-based disputes after they occur. More importantly, proper legal architecture enables franchisors to move quickly and confidently in attractive markets, creating competitive advantages that justify the initial investment many times over. The question isn't whether these challenges exist—they're inherent in international business. The question is whether your organization is prepared to address them systematically and strategically, turning potential legal pitfalls into competitive advantages through superior planning and execution. The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Irish Times
05-07-2025
- Business
- Irish Times
Denis O'Brien says it is time to question ‘conduct' of corporate enforcement chief
Businessman Denis O'Brien has criticised the State's business law watchdog over the years-long Independent News & Media (INM) investigation, saying the time had come to question the 'role and conduct' of Corporate Enforcement Authority (CEA) chief executive Ian Drennan . Mr O'Brien was INM's main shareholder when it was rocked by turmoil over an unlawful breach of company data relating to 19 named individuals, among them journalists and former company officials, some of whom had come into conflict with him. The disruption in INM, Ireland's largest newspaper business, led to its sale in 2019 to Belgian group Mediahuis. That deal crystallised a loss exceeding €450 million for Mr O'Brien on his INM investment. Mr Drennan ran the CEA's predecessor, the Office of the Director of Corporate Enforcement, when it asked the High Court in 2018 to send inspectors into the company. READ MORE In a statement, Mr O'Brien said: 'Mr Drennan's failure to engage in due process and interview all relevant parties before heading to the High Court in 2018 in undue and irrational haste calls into question his continued suitability for the position. 'Mr Drennan's conduct showed little respect for due process, proper procedures or basic objectivity. As a result, he inflicted and facilitated very significant reputational damage for several individuals over six years.' [ Leslie Buckley questions way that corporate enforcer investigated INM saga Opens in new window ] Minister for Enterprise Peter Burke , who has political responsibility for the CEA, had no comment on Mr O'Brien's remarks, citing CEA independence of the Government in its work. Asked whether Mr Burke had confidence in Mr Drennan, his department said: 'Yes. The Minister has confidence in Ian Drennan as the sole appointed member of the CEA.' Mr O'Brien was responding to the CEA decision not to take enforcement action over the data breach. The decision was set out on Thursday in its 2024 annual report. How the wealthy are buying up land to avoid inheritance tax Listen | 22:03 That followed on from a report 12 months ago by court inspectors who found after a six-year investigation that INM affairs were not conducted in breach of the Companies Acts. Still, inspectors Seán Gillane SC and UK solicitor Richard Fleck reported 'technical' breaches of the Data Protection Acts. They also found inside information was disclosed to Mr O'Brien by Leslie Buckley, the long-time ally who represented his interests as INM chairman. Mr O'Brien said: 'Mr Drennan took a deliberate decision not to engage with or interview several parties, including myself, who could have provided him with answers to his questions and saved the State and other parties in excess of €40 million. 'His failure to make any reference to this element of the debacle in the annual report speaks for itself.' There was no response from Mr Drennan's office to Mr O'Brien's statement by the close of business on Friday evening. Mr Buckley, the former INM chairman, had criticised Mr Drennan in similar terms on Thursday. Responding on Friday to Mr Buckley, the CEA said: 'As detailed in the annual report, the application to the High Court in this case followed a lengthy investigation and, despite being robustly resisted by the company, satisfied the High Court that the evidential threshold necessary to warrant the appointment of court-appointed inspectors had been fully met and the court's jurisdiction engaged.'
Forbes
06-06-2025
- Business
- Forbes
Solos, Corporations, And LLCs: What Works Best For Your Business?
Getting the choice of entity right at the start is crucial, since switching later can have tax and other consequences. When you're getting started in business, it can be tempting to rush through to get to the good stuff. After all, you have a cool idea and an even cooler sounding name. Can't you just tack 'LLC' onto the end using one of those online services? The short answer is no. Entity selection is more important than you think. Your choice of entity can affect the number and identity of shareholders and partners, equity structure, control and management, as well as the type of funding you may be eligible to receive. I know what you're thinking: why not just pick something to get started and change it if it doesn't work? Getting it right from the beginning is crucial. While it's true that you can make a switch later on, there could be tax and other consequences that may impact you in the long run. The best plan is to get it right the first time. When making a choice about an entity, there's a lot to consider, including two key things: Entity choice can get pretty complicated. There are several key factors to consider, including liability, organizational control, potential funding sources, and tax implications. What follows is a brief primer on the most common forms of entity (with a focus on taxes, of course): The sole proprietorship is the simplest form of business entity. There is no formal procedure to establish a sole proprietorship—no forms to fill out, no agreements to sign, and no documents to file with the state. With few formal accounting requirements, transferring personal and business assets in and out of the business is easy. However, the absence of formal requirements means that the owner of the sole proprietorship can be personally liable for the business's debts and obligations, including tax bills and legal awards. When creditors, including the IRS, attempt to collect, they may be able to reach personal assets, like your house, to satisfy judgments. For federal tax purposes, taxpayers do not file a separate tax return for a sole proprietorship. Income and expenses from the business are reported on an individual taxpayer's Form 1040 on Schedule C. In some cases, that produces a less favorable tax result—but on the plus side, losses from your business can be used to offset other taxable income. Establishing a partnership (or general partnership) is nearly as easy as creating a sole proprietorship—it's just an association of two or more individuals who agree to run a business for profit. As with a sole proprietorship, most states do not require formal procedures to establish a partnership—there are no forms to complete, no agreements to sign, and no documents to file, even though having these is advisable for business and legal purposes. In a general partnership, partners share liability for business obligations (typically, jointly and individually). For federal tax purposes, although a partnership is required to file a separate return (Form 1065), the income and losses associated with the partnership pass through to the individual partners. Items of income or loss retain their character and are reported to each partner in proportion to their interest, as determined by statute or the partnership agreement. Each partner is then responsible for reporting that information on their individual tax returns. A limited partnership is typically defined as a partnership formed by one or more general partners and one or more limited partners. General partners are treated much like what we think of as "typical" partners—they have joint and several liability for the partnership's debts and often exercise control over the partnership. The 'limited' in a limited partner means that those partners may enjoy limited liability protection from the partnership's liabilities (this depends on state law), but it also tends to mean that those partners have a lesser role in operations and decision making. For federal tax purposes, a limited partnership is treated as a pass-through entity, similar to a general partnership. A limited liability partnership (LLP) is similar to a general partnership, but unlike a general partnership, which can exist informally, an LLP must be registered with the state. The benefit of registration—a formal acknowledgment of the entity—is that the LLP assumes a form of limited liability similar to that of a corporation. Typically, this means that partners aren't liable for the wrongful actions of the other partners, though the level of liability can vary from state to state. Generally, there is unlimited personal liability for the partnership's contractual obligations, like promissory notes and mortgages. For federal tax purposes, an LLP is treated as a pass-through entity, similar to a general partnership. Just over half of U.S. states recognize a limited liability limited partnership (LLLP). You can think of an LLP as a general partnership with limited liability, so adding that extra 'L' typically results in an LLLP being treated as a limited partnership with that same limited liability. That means that the primary advantage of an LLLP is limited liability protection for the general partner. For federal tax purposes, an LLLP is treated as a pass-through entity, similar to a general partnership. The limited liability company (LLC) remains the most popular type of business in the U.S.—approximately four in 10 small businesses will form as an LLC. Here's what makes it so popular: it offers the liability protection of a corporation while allowing for taxation as either a partnership or a corporation. An LLC consists of members, rather than shareholders. Individual members are generally protected from liability as long as corporate formalities are maintained. LLCs must typically register with the state and are often required to comply with additional requirements, such as annual reports. Even with the extra paperwork, LLCs typically have considerably fewer corporate formalities than other corporations. For federal tax purposes, the default tax treatment of an LLC is that it operates as a pass-through entity (meaning that it will file a partnership tax return). However, an LLC can opt to be treated differently by making an election. There may be instances where corporate tax treatment is more desirable (for example, when the individual members are foreign nationals) or when it makes sense to be taxed as an S corporation (typically related to compensation). It's worth noting that states may impose additional corporate taxes on LLCs, even if they are otherwise considered partnerships, which can increase the costs associated with being an LLC. A single-member limited liability company (SMLLC) is just what it sounds like: an LLC with a single member. An SMLLC retains the advantages of an LLC for most purposes—except when it comes to tax. For federal tax purposes, an SMLLC is treated as a "disregarded entity.' This means that the owner does not file a separate tax form for the business. Instead, income and expenses are reported on an individual taxpayer's Form 1040, Schedule C, just like a sole proprietor. While all states recognize SMLLCs, the tax treatment is not the same in every state (meaning that not all states treat SMLLCs as disregarded entities). A C corporation—which gets its name from Subchapter C of the Internal Revenue Code—is what most people consider when thinking about a business. In a typical C corporation, the business is owned by individual shareholders who hold stock certificates or shares (yes, we still call them certificates even though it's rare to have an actual piece of paper in hand). Shareholders vote on policy issues, but the decisions regarding company policy are left to the Board of Directors. The catch? The Board of Directors is typically elected by the shareholders. The day-to-day operations of running the company are performed by the officers of the corporation—think chief executive officers (CEOs). The primary advantage of a C corporation is limited liability—individual shareholders are typically not responsible for the company's debts, obligations, and actions. For federal tax purposes, a C corporation is a separate taxable entity that figures income or loss each year and pays tax on taxable income. The current federal corporate income tax rate is a flat rate of 21% (before 2017, the rate was 35%). Shareholders also pay tax at their individual income tax rates for any dividends or taxable distributions paid out during the year. Since tax is already paid on the company's profits, this is where the term "double taxation" originates. A professional corporation (PC) is a type of corporation limited to specific occupations, typically service professions such as law, medicine, and architecture. A PC is generally not allowed to extend its services beyond those for which it was specifically incorporated with the state. For example, a PC for law cannot offer design services. In most states, this also means that individuals who are not licensed in the profession may not be shareholders—this rule applies not only to employees but also to potential investors and family members. For federal tax purposes, a PC may elect to be taxed as either a C or S corporation. Most PCs are considered personal service corporations (PSC) by the IRS. However, the terms don't mean the same thing—a PC is the legal entity, while a PSC is the tax classification. Currently, a PSC is taxed at a flat rate of 21%. A benefit corporation, also known as a B corporation, is a legal entity recognized in most states. It enables a corporation to consider social and environmental impacts when making management decisions as part of a broader public benefit. This differs from other for-profit corporations, which typically have a duty to shareholders to prioritize profits—it also means that some benefit corporations are less attractive to investors. Well-known benefit corporations include King Arthur Flour and Patagonia. For federal tax purposes, there is no difference between a B corporation and a C corporation—they are taxed the same. Don't confuse a benefit or B corporation with a B Corp. Although they sound the same, a B Corp is a business certified by B Lab, a third-party organization. To certify as a B Corp, a business must meet specific requirements, including achieving high social and environmental performance scores. You can certainly be a B Corp as a benefit corporation (see again King Arthur), but the terms are not interchangeable. Importantly, a B Corp doesn't confer any particular legal status. For federal tax purposes, a B Corp does not result in any tax benefit. You are taxed according to your entity status and federal tax elections. An S corporation is often misunderstood. It's not a legal entity—it's a tax election that gets its name from Subchapter S of the Internal Revenue Code. To be considered an S corporation, a business must be formed as a separate legal entity (such as a corporation or LLC) at the state level. Then, an election is made at the federal level to be taxed as an S corporation. Under federal law, an S corporation must be a domestic corporation with shareholders who are domestic individuals, trusts, or estates (no partnerships, corporations, or non-resident alien shareholders). An S corporation can have no more than 100 shareholders, and most offer only one class of stock. Additionally, certain types of businesses, such as certain financial institutions, insurance companies, and domestic or international sales corporations, aren't eligible to elect S-status. Those limitations mean that an S corporation may not be a good fit for companies expecting to grow quickly and seek outside investment. For federal tax purposes, S corporations are considered pass-through entities, though not quite like partnerships. There is a separate tax return for an S corporation (Form 1120-S) that reflects key differences in how income and losses are accounted for compared to a partnership. However, like a partnership, most items of income or loss retain their character and are reported to shareholders in proportion to their interest. A considerable appeal of S corporations is that they allow owners to take both a salary and a distribution from the business. Since distributions aren't subject to payroll taxes (Social Security and Medicare), the result can sometimes result in tax savings—it can also create an incentive to shrink wages and inflate distributions. The IRS insists that owners be paid reasonable compensation—being greedy can land you in hot water. A corporation sole can be a legitimate entity organized for religious (non-profit) purposes in some states. However, despite what scammers suggest, a taxpayer cannot use a corporation sole created simply to avoid paying tax. The IRS has issued warnings about these scams for decades, but taxpayers still bite—often in a failed bid to secure protection from creditors. For federal tax purposes, a bona fide corporation sole may be exempt from tax. However, individual taxpayers who claim tax benefits based on a corporation sole scheme will not only have to pay the tax due (plus penalties and interest) but may also face substantial civil and criminal penalties. Small businesses have lots of choices when it comes to selecting an entity and making tax elections. However, not every choice is interchangeable with another, and where you live might limit your options. Additionally, your facts and circumstances—including your plans for future investment—can mean that one choice is necessarily better than another. Consult with a professional before taking action.
Yahoo
22-05-2025
- Business
- Yahoo
Texas business law overhaul would shield Musk pay package and up Delaware stakes
Texas rewrote its business laws, hoping to capitalize on companies' growing discontentment with Delaware. A bill enacted earlier this week makes it significantly harder for shareholders to bring lawsuits like the one that challenged Elon Musk's $56 billion pay package in 2017 and caused the billionaire to move Tesla's legal home from Delaware to Texas. The new law lets companies adopt rules that would require shareholders to hold at least 3% of the stock to file a common type of lawsuit. It also would replace trial by jury — a big risk for companies, given their unpredictability — with a hearing by a judge in a special court for business disputes created last year. While Texas business law is largely untested, the slew of changes has caught the attention of top securities lawyers, some of whom expect clients will be enticed by the corporate-friendly mentality Texas is pushing. Tesla is the biggest company incorporated in Texas and moved last week to adopt that 3% litigation threshold — at current prices, a $31.5 billion bar cleared only by Musk and a handful of passive index funds that are unlikely to ever sue. As the company's board weighs a fresh pay package for the CEO, who has said he will soon refocus on Tesla, it can do so knowing it's unlikely to be sued. A separate bill under consideration could shield companies merely headquartered (rather than legally incorporated) in Texas, a much broader group that includes AT&T and ExxonMobil, from 'gadfly' shareholder proposals by requiring minimum stock holdings of at least $1 million. Exxon has faced such proposals from climate activists and fought back aggressively. And in a move sure to please both Musk and Jamie Dimon, Texas legislators are currently considering a bill that would regulate shareholder advisory firms like ISS and Glass Lewis by requiring them to only consider the financial interest of shareholders when making recommendations. Where this leaves both active and passive shareholders is a larger question. Index funds like Blackrock and Vanguard are unlikely to be particularly opposed to reincorporation out of Delaware, one leading securities lawyer told Semafor. Activist investors, on the other hand, have come to rely on a familiar set of tricks afforded by Delaware law — including books and records requests, known as Section 220 demands in Delaware — to put pressure on companies. Texas' business code allows shareholders to request that information broadly, but puts guardrails on its scope by excluding emails and text messages from being obtained (to the chagrin of journalists, too.) Mercado Libre is asking shareholders to approve a move to Texas. Meta a Texas move, The Wall Street Journal reported, but ultimately didn't put it before shareholders this year. and , both controlled companies, are seeking to move to Nevada. Southwest Airlines and a slew of energy companies are the only other big S&P 500 companies currently incorporated in the Lone Star State. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
13-05-2025
- Business
- Forbes
15 Frequently Asked Questions About Starting A Business
By Richard D. Harroch Having been a startup lawyer, entrepreneur, and venture capitalist, I have been asked many of the following questions over the years by entrepreneurs when starting a business. Sometimes there isn't an easy answer, and as lawyers often like to say, 'It depends on the circumstances.' But here are my shorthand answers to the most frequently asked questions on starting a business, which hopefully will be right 95% of the time. Start it as an S corporation or an LLC, unless you have to issue both common stock and preferred stock; in that case, start it as a C corporation. An S corporation can easily be converted later into a C corporation. Partnerships and sole proprietorships are to be avoided because of the potential personal liability to the owners of the business. The standard answer to this is Delaware because of its well-developed corporate law. However, my answer is that in most instances it should be the state where the business is located, as this will save you some fees and complexities. You can always reincorporate later in Delaware. As much as you can reasonably afford, and in an amount to at least carry you for 6-9 months with no income. What you will find is that it always takes you longer to get revenues, and that you will experience more expenses than you anticipated. Any of the following: This is difficult. First brainstorm with a bunch of different names. Then do a Google search to see what is already taken, and that will eliminate 95% of your choices. Make it easy to spell. Make it interesting. Don't pick a nonsensical name where people won't have a clue as to what you do (with all due respect to names like Google and Yahoo). Do a trademark/tradename search on the name, then make sure you can get the domain name. See What Should I Name My Startup: 13 Smart Tips. The key challenges to starting a small business are: Key mistakes made by entrepreneurs include: Ideas are a dime a dozen. It's the actual implementation of an idea that is more important. If it's truly unique, get a patent for it (see You may get some protection through copyright, trade secret programs, or NDAs, but not a lot. Every good '.com' domain name is already taken. And I usually only recommend '.com' names. Ultimately, 99% of domain names are available to be bought—you just have to be prepared to pay for the name. Do a 'WHOIS Search' at to find out the contact information for the owner of the domain name you are interested in, and offer to buy the name. Don't be naive and offer $500 for a premium domain name. You will be ignored. Be willing to pay a fair amount for a good name. Entire books are written on how to get website traffic. The key ways are as follows: Key steps to take: It's sometimes useful to come up with a business plan to think through what you want to do for the development of the product or service, marketing, financial projections, and more. Then get input from trusted business/finance advisors. But don't go overboard with a 50-page business plan. In reality, many startups have to deviate from their plan. See Don't Waste Time on a Startup Business Plan—Do These 5 Things Instead. Consider the following insurance, depending on your business: Related Articles: Copyright © by Richard D. Harroch. All Rights Reserved.
