Who is taxed on Crave Cookies' taxable income?
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, Crave Cookies Franchising, LLC has elected to be taxed as a limited liability company (LLC) under the Internal Revenue Code (IRC). As a result, the company itself is not subject to income taxes. Instead, the members of the LLC are taxed on the company's taxable income. This means that the individual owners or members of Crave Cookies Franchising, LLC report their share of the company's profits or losses on their personal income tax returns.
This tax structure is common for LLCs and pass-through entities, as it avoids double taxation, which can occur with corporations where the company is taxed on its profits, and then shareholders are taxed again when they receive dividends. For a prospective Crave Cookies franchisee, this information is relevant because it provides insight into how the franchisor's business is structured and taxed. While this doesn't directly impact the franchisee's taxes, understanding the franchisor's financial structure can be helpful in assessing the overall health and stability of the franchise system.
Furthermore, the FDD notes that Crave Cookies considers various factors when evaluating and estimating its tax positions and benefits. The company recognizes tax positions when it is more likely than not that the positions will be sustained upon examination, based on technical merits. Reserves are established if there is a belief that certain positions may be challenged. Interest and penalties related to unrecognized tax benefits are recognized in the provision for income taxes. This indicates that Crave Cookies takes a careful and conservative approach to its tax obligations, which can be seen as a positive sign for potential franchisees.