Where would any adjustments from IRS examinations be reflected for Engineering For Kids?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is a single-member LLC and will be treated as a disregarded entity for both federal and state income tax purposes. Accordingly, the current period income will be included on the income tax return of the member. Additionally, any adjustments determined pursuant to IRS examinations would similarly be reflected on the income tax returns of the stockholders. Therefore, no provision or liability for either current federal income taxes or the effects of IRS examinations on prior years' federal income taxes have been included in the financial statements.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to Engineering For Kids's 2025 Franchise Disclosure Document, because the company is a single-member LLC, it is treated as a disregarded entity for federal and state income tax purposes. This means that the current period income is included on the income tax return of the member.
Therefore, any adjustments resulting from IRS examinations would be reflected on the income tax returns of the stockholders. This is because the company's income and expenses are passed through to its member for tax purposes.
Because Engineering For Kids operates this way, the company's financial statements do not include any provision or liability for current federal income taxes or the effects of IRS examinations on prior years' federal income taxes. This is a fairly common practice for single-member LLCs and other pass-through entities, as the tax liability ultimately rests with the individual or entity that owns the company.