How are federal and state income taxes handled for 7 Brew, given its LLC structure?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is an LLC and therefore treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the member. As such, there is no recognition of federal or state income taxes in the accompanying financial statements. Any uncertain tax position taken by the member is not an uncertain position of the Company. All tax returns filed since inception are subject to review by the Internal Revenue Service.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 82)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, as a limited liability company (LLC), 7 Brew is treated as a partnership for federal and state income tax purposes. This means that the company itself does not pay income taxes. Instead, all income tax liabilities or benefits are passed through to its member.
Therefore, the financial statements of 7 Brew do not include any recognition of federal or state income taxes. The responsibility for these taxes falls on the member, not the company. Any uncertain tax positions taken by the member are considered the member's responsibility, not the company's.
It's important to note that all tax returns filed since the company's inception are subject to review by the Internal Revenue Service. This pass-through taxation is a common structure for LLCs, shifting the tax burden from the company to the individual or entity that owns it. Prospective franchisees should consult with a tax advisor to understand the implications of this structure for their own tax situation.