How is the member taxed on their share of Bevaris Alliance company earnings?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
Income taxes. Federal income taxes are not payable by, or provided for, the Company. The member is taxed individually on their share of Company earnings. The Company has elected to be treated as a corporation and taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal corporate income taxes on its taxable income and is not allowed a net operating loss carryover or carryback as a deduction. Instead, the member includes their respective share of the Company's net income or loss in their individual income tax returns. Although the State of California follows Subchapter S of the Internal Revenue Code with respect to taxation of individuals on Company earnings, it also imposes a minimum tax of 1.5% on Company earnings.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 FDD, Bevaris Alliance has elected to be treated as a corporation and taxed under Subchapter S of the Internal Revenue Code. This means that Bevaris Alliance itself does not pay federal corporate income taxes on its taxable income and is not allowed a net operating loss carryover or carryback as a deduction. Instead, the member includes their respective share of the company's net income or loss in their individual income tax returns.
While the State of California follows Subchapter S of the Internal Revenue Code with respect to taxation of individuals on company earnings, it also imposes a minimum tax of 1.5% on company earnings. This implies that while the member is taxed individually on their share of the company's earnings at the federal level, the company itself is subject to a minimum tax in California.
For a prospective Bevaris Alliance franchisee, this information is relevant because it clarifies how the company's earnings are taxed and how those taxes may affect the member's individual tax obligations. The franchisee should consult with a tax professional to understand the full implications of this tax structure and how it may impact their personal financial situation.