Why are no federal or state income taxes included in the Bens Soft Pretzels financial statements?

According to the 2025 FDD, the financial statements for Bens Soft Pretzels Franchising Corporation do not include provisions or liabilities for federal and state income taxes because the company has elected to be taxed as an S corporation under Section 1362 of the Internal Revenue Code. As an S corporation, the company's taxable income is passed through to its shareholders, who are then responsible for paying taxes on their proportionate share of the income. This means that the tax liability shifts from the corporation itself to the individual shareholders.

However, it's important to note that while Bens Soft Pretzels generally avoids corporate income taxes due to its S corporation status, certain states may not recognize this status for income tax purposes. As a result, the company did pay state taxes of $573 in 2024, $463 in 2023, and $210 in 2022. This indicates that while the majority of the company's income is taxed at the shareholder level, there may be some residual state tax obligations.

For a prospective franchisee, this information is relevant because it provides insight into how Bens Soft Pretzels manages its tax obligations. The S corporation structure can be advantageous for both the company and its shareholders, as it avoids double taxation (taxation at both the corporate and individual levels). However, franchisees should be aware that the tax implications of owning a Bens Soft Pretzels franchise can be complex and may vary depending on their individual circumstances and the state in which they operate. It would be prudent for potential franchisees to consult with a tax professional to understand the specific tax implications of investing in a Bens Soft Pretzels franchise.