Does Bor Restoration's financial statements reflect a provision for income taxes?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company is a single member limited liability company and has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owner on the respective income tax returns. Accordingly, the Company is not required to take any tax positions in order to qualify as a pass-through entity. The Company is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Company has not taken other tax positions which must be considered for disclosure.
The Company is no longer subject to U.S. federal tax audits on its Form 1040 by taxing authorities for years ending prior to December 31, 2020. The Company is no longer subject to state tax audits on its Form 104 state tax return by taxing authorities for years ending prior to December 31, 2019. The years subsequent to this year contain matters that could be subject to differing interpretations of applicable tax laws and regulations. Although the outcome of tax audits is uncertain, the Company believes no issues would arise.
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, the company's financial statements do not reflect a provision for income taxes. This is because Bor Restoration is structured as a single-member limited liability company (LLC) and has elected to be treated as a pass-through entity for income tax purposes. As a result, the company itself is not subject to income taxes. Instead, all taxable income, deductions, and tax credits are passed through to and reported by the owner on their individual income tax returns.
Because Bor Restoration is a pass-through entity, it is not required to take any specific tax positions to maintain this status. The company does file tax returns with the Internal Revenue Service and other taxing authorities, but these filings do not necessitate a provision for income taxes within the company's financial statements. This treatment is typical for LLCs where the tax liability passes through to the owner's personal income.
The FDD also indicates that Bor Restoration is no longer subject to U.S. federal tax audits on its Form 1040 by taxing authorities for years ending prior to December 31, 2020, and is not subject to state tax audits on its Form 104 state tax return by taxing authorities for years ending prior to December 31, 2019. However, the years following these dates may still be subject to differing interpretations of applicable tax laws and regulations. While the outcome of potential tax audits is uncertain, Bor Restoration believes that no issues would arise.