California has very specific laws about how business relationships are structured, and whether or not a business contract constitutes a “franchise”, a “distributorship”, a “licensee” or simply a normal transaction of goods and services.  I cannot stress enough the severity of business risk a company undertakes by attempting to mask one way of doing business as another.  Generally speaking, a “franchise” relationship requires specific elements to be in place:

1. The grant of the use of a business name or Trademark
2. The use of a process or “system” is required
3. A fee is charged for the above two items, either up front or as part of an ongoing contract

You may not have to register as a franchisor if one of these three elements is not in place.  For example, you may be able to require your business partner to stock specific products that you sell and limit distribution to a single area, and charge them for each step as long as they are not required to use your business name or trademarks.  The real answer to the question above in my mind is PROFIT.  What form of business structure provides your company with the greatest potential likelihood of success and profit?  That answer should determine which form of business relationship is required in your circumstance.  You want to follow the laws of each state in which you transact business.  The structure of the relationship and associated entities is determined by how business will be transacted, and the profitability of that business relationship should easily cover the expense of any mandated registration or filing requirements for both parties.