Is Bombs Away subject to corporate income taxes?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company, with the consent of its shareholders, has elected to be an S-Corporation (for tax purposes). In lieu of corporate income taxes, the shareholder(s) of an S-Corporation is taxed based on its proportionate share of The Company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Bombs Away FDD, Bombs Away Franchising LLC has elected to be taxed as an S-Corporation. This election has significant implications for how the company's income is taxed.
Instead of paying corporate income taxes, the taxable income of Bombs Away is passed through to its shareholders. The shareholders then report their proportionate share of the company's income on their individual tax returns. This means that Bombs Away itself does not pay corporate income taxes at the entity level.
The FDD states that because of this S-Corporation election, "no provision or liability for income taxes has been included in these financial statements." This is a direct consequence of the tax structure Bombs Away has chosen.
For a prospective franchisee, this information is primarily relevant for understanding the financial statements of Bombs Away. It indicates that the company's financial performance is not directly affected by corporate income taxes, as the tax burden falls on the shareholders individually. This structure can influence decisions related to profit distribution and overall financial strategy.