How is Apricot Lane taxed for federal income tax purposes?
Apricot_Lane Franchise · 2025 FDDAnswer from 2025 FDD Document
e fee for additional stores for an existing franchisee is $20,000.
Income Taxes
The Company has elected to be taxed as an S corporation for federal income tax and California franchise tax purposes. As a result, the Company does not pay federal corporate tax on its income; instead, the stockholders pay tax on their respective shares of such income. California has adopted similar provisions, except that there is a 1.5% franchise tax assessed on California taxable income and a minimum tax of $800. For income tax reporting purposes, the Company reports income on the cash basis of accounting. The Company also withholds and pays income tax in multiple states where required.
Management believes that all of the positions taken by the Company in its federal and state income tax returns are more likely than not to be sustained upon examination. The Company's tax returns are subject to examinations by the Internal Revenue Service and the state auth
Source: Item 23 — RECEIPTS (FDD pages 51–222)
What This Means (2025 FDD)
According to the 2025 Apricot Lane Franchise Disclosure Document, Country Visions, Inc., the franchisor, has elected to be taxed as an S corporation for federal income tax purposes. This means that Apricot Lane itself does not pay federal corporate income tax on its income. Instead, the company's stockholders are responsible for paying taxes on their respective shares of the income.
California has adopted similar provisions for state income tax, with a few exceptions. There is a 1.5% franchise tax assessed on California taxable income, and a minimum tax of $800. For income tax reporting purposes, Apricot Lane reports income on the cash basis of accounting. The company also withholds and pays income tax in multiple states where required.
Apricot Lane's management believes that the positions taken by the company in its federal and state income tax returns are likely to be sustained upon examination. However, the company's tax returns are subject to examinations by the Internal Revenue Service and state authorities, generally for three years and four years, respectively, after they are filed. This is a standard audit window, but franchisees should be aware that discrepancies could lead to adjustments and potential liabilities.