McDonald's Tax Entity Structure

When an owner/operator receives notification from McDonald’s Corporation that he or she will be getting a new McDonald’s franchise, or when an owner/operator negotiates to acquire an existing location, a very important decision must be made about family ownership percentages and the type of tax entity that will own and operate that location. Concannon, Miller & Company, P. C. advises on family ownership alternatives, and on which type of entity to choose, considering the following criteria.

• Liability Protection
• Income Tax Minimization - Federal, State and Local
• Social Security Tax and Medicare Tax Minimization
• Estate Planning Considerations
• Cost of Establishing and Maintaining Entity Structure
• Simplicity vs. Complexity of Structure
• Flexibility for Owner’s Compensation/Draw

After an entity structure is selected, a second decision must be made that will significantly impact on the above-what portion of the profits should be designated as compensation for the owner/operator’s services, and what portion should be designated as return on investment. This decision should be related to the person(s) or entity that are given executive management responsibility. Sometimes, the best results can be achieved by utilizing a management company.