The Disadvantages of Business Licenses

326 Words2 Pages
1. Increases Business Costs * Intellectual property licenses can increase the operating costs for the business. Licenses can be costly to obtain depending on the type of intellectual property license and the associated filing fees. Companies may also seek outside help to confirm their products or services meet the requirements for intellectual property licenses. Consultants may require the company to redo their paperwork or tweak their product or service to meet the requirements of the license. Extending the amount of time spent on obtaining the license also increases a company's opportunity cost, meaning they are losing money from potential sales of their products or services. Creates Legal Issues * Intellectual property licenses can create a broad range of legal issues for companies, stemming from copied products and services by competitors or future renewal fees and legal searches for maintaining the intellectual property license. Most companies will need to keep a legal firm on retainer or continually hire a lawyer every time an intellectual property license issue arises. Legal issues take time away from the company's business operations, limiting the amount of revenue a company can generate during the legal proceedings. Smaller companies will face a higher impact from the legal issues, since many small businesses rely on the owner or proprietor for completing most of the business services. * Limits Potential Revenue Streams * Companies that obtain a license for a particular good or service may choose to franchise their operations to future licensees. While this usually creates a larger market for companies to operate in, it can also limit their ability to generate income since they must rely their franchisees to make money. The franchisor company must focus on managing its franchisees and ensuring that each franchisee follows the
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