Why are no income taxes included in Bombs Away's financial statements?

According to Bombs Away's 2024 Franchise Disclosure Document, the company's financial statements do not include a provision or liability for income taxes because Bombs Away Franchising LLC has elected to be taxed as an S-Corporation. This election requires the shareholder(s) to report their proportionate share of the company's taxable income on their individual income tax returns, in lieu of the corporation paying corporate income taxes.

For a prospective Bombs Away franchisee, this means that the company's profits and losses are passed through directly to its owners for tax purposes. The company itself does not pay corporate income taxes. This structure can be advantageous for smaller businesses, as it avoids the double taxation that can occur with C-Corporations, where profits are taxed at both the corporate level and again when distributed to shareholders.

However, it's important for potential franchisees to understand the implications of this structure. As a shareholder in an S-Corporation, they will be responsible for paying income taxes on their share of Bombs Away's profits, regardless of whether those profits are actually distributed to them. Therefore, franchisees should carefully consider their personal tax situation and consult with a tax advisor to understand the full impact of investing in a Bombs Away franchise.