Does Crave Cookies include a provision or liability for income taxes in its financial statements?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Limited Liability Company Tax Status - the Company, with the consent of its members, has elected under the Internal Revenue Code (IRC) to be taxed as a limited liability company. In lieu of income taxes, the members are taxed on the Company's taxable income. Therefore, no provision or liability for income taxes has been included in the financial statements.
The Company considers many factors when evaluating and estimating its tax positions and tax benefits. Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the positions will be sustained upon examination. Reserves are established if it is believed certain positions may be challenged and potentially disallowed. If facts and circumstances change, reserves are adjusted through the provision for income taxes. The Company recognizes interest expense and penalties related to unrecognized tax benefits in the provision for income taxes.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company's financial statements do not include a provision or liability for income taxes. The reason for this is that Crave Cookies has elected to be taxed as a limited liability company (LLC) under the Internal Revenue Code (IRC). As a result, the company's taxable income is reported to the individual members, who then include it in their own tax returns.
This means that Crave Cookies itself does not pay income taxes at the corporate level. Instead, the tax liability passes through to its members. This is a common arrangement for LLCs and other pass-through entities, as it avoids double taxation (where the company's income is taxed once at the corporate level and again when distributed to the owners).
However, Crave Cookies does consider various factors when evaluating and estimating its tax positions and potential tax benefits. The company recognizes tax positions only when it is more likely than not (greater than 50% likelihood) that the positions will be sustained upon examination, based on technical merits. If it is believed that certain positions may be challenged and potentially disallowed, reserves are established. These reserves are adjusted through the provision for income taxes if facts and circumstances change. Additionally, Crave Cookies recognizes interest expense and penalties related to unrecognized tax benefits in the provision for income taxes.
For a prospective franchisee, this means that the profitability of Crave Cookies as a franchisor is not directly affected by income taxes. However, franchisees should be aware that the tax implications for their own individual businesses may differ, and they should consult with a tax professional to understand their own tax obligations.