What are the Buildingstars franchisee's obligations regarding taxes (Item 9) and how does this relate to potential bankruptcy (Item 4)?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
FRANCHISEE shall make timely filings of all tax returns and shall pay when due all taxes levied or assessed on, and related to this Agreement and the Business.
At no time is BUILDINGSTARS required to inform FRANCHISEE of any federal, state, municipal, or local law, rule, regulation, ordinance code, or tax.
FRANCHISEE is and will continue to be responsible for complying with all local, state and federal tax requirements including but not limited to income tax, sales tax, use tax or any other tax required along with the proper reporting requirements.
FRANCHISEE agrees to indemnify and/or reimburse BUILDINGSTARS and its Affiliates for all capital, gross receipts, sales, and other taxes and assessments imposed by any applicable state or local governmental authority as a result of the conduct of the Business or the license of any of BUILDINGSTARS or its Affiliates' intangible property to FRANCHISEE (whether required to be paid by BUILDINGSTARS or its Affiliates, withheld by FRANCHISEE or otherwise). FRANCHISEE's obligation to indemnify or reimburse BUILDINGSTARS or its Affiliates for these taxes does not extend to income-type taxes which a state or local government imposes on BUILDINGSTARS or its Affiliates' income.
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- The Customer ceases to do business or is insolvent or bankrupt; or
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- The Customer moves outside of the Territory.
In such event, BUILDINGSTARS will offer FRANCHISEE a new customer account or increase an existing customer account with Monthly Contract Revenue of at least an equal dollar amount to the lost account's Monthly Contract Revenue. FRANCHISEE will not be entitled to any refund or reduction in Account Sales Fees already paid. In addition, FRANCHISEE will be required to continue to pay on the outstanding Account Sales Fee due in accordance with the Promissory Note.
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, franchisees are responsible for managing and paying all taxes related to their franchise. This includes timely filing all tax returns and paying all levied or assessed taxes related to the agreement and the business. Buildingstars is not required to inform franchisees of any federal, state, municipal, or local tax laws. Franchisees must comply with all local, state, and federal tax requirements, including income tax, sales tax, use tax, and proper reporting. Additionally, franchisees must indemnify or reimburse Buildingstars for taxes and assessments resulting from the business's conduct or the license of intangible property, excluding income-type taxes on Buildingstars's income.
Regarding bankruptcy, the FDD states that if a customer of the Buildingstars franchisee ceases to do business or becomes insolvent or bankrupt, Buildingstars will offer the franchisee a new customer account or increase an existing one with equivalent monthly contract revenue. The franchisee will not receive a refund or reduction in Account Sales Fees already paid and must continue paying any outstanding Account Sales Fee according to the Promissory Note.
These obligations highlight the importance of financial responsibility for Buildingstars franchisees. Failure to manage tax obligations could lead to penalties and legal issues, potentially contributing to financial instability. While Buildingstars provides a replacement customer account in the event of a customer bankruptcy, the franchisee remains responsible for the Account Sales Fees, underscoring the need for careful financial planning and risk management. Prospective franchisees should consult with financial and legal advisors to fully understand these obligations and their potential impact on their business.