Two individuals decide to start a business together. They will contribute equally to the business, develop a new entity together, and share revenues, expenses, and assets. Which type of business agreement are these two individuals using?

A subsidiary is a company that is controlled by another, larger parent company. In this case, the two individuals are forming a new entity together rather than one controlling the other, which means a subsidiary arrangement does not apply here.

A franchise involves one party (the franchisee) obtaining the rights to operate a business using the branding and business model of another party (the franchisor). In this scenario, both individuals are equally contributing to and developing their business, rather than one party operating under another's established brand or system.

A licensing agreement permits one party to use the intellectual property or assets of another party in exchange for a fee or royalty. The arrangement described does not involve one individual licensing rights from the other; instead, both are actively participating in creating a new entity and sharing all aspects of the business equally.