What is the effect of the Company being structured as an LLC on Face Foundrie's income taxes?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is structured as a limited liability company ("LLC") under the laws of the state of Minnesota. Accordingly, the income or loss of the Company will be included in the income tax returns of the members. Therefore, there is no provision for federal and state income taxes.
If taxing authorities were to disallow any tax positions taken by the Company, the additional income taxes, if any, would be imposed on the member rather than the Company. Accordingly, there would be no effect on the Company's financial statements.
The Company's income tax returns are subject to examination by taxing authorities for a period of three years from the date they are filed. As of December 31, 2024, the 2023, 2022 and 2021 tax years were subject to examination.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the company is structured as a limited liability company (LLC) under Minnesota law. As a result, Face Foundrie itself does not pay federal or state income taxes. Instead, the company's income or losses are passed through to its members (owners) and are included in their individual income tax returns. This is a common characteristic of LLCs, designed to avoid double taxation, where the company's profits are taxed at both the corporate level and again when distributed to owners.
Furthermore, the document states that if taxing authorities were to disallow any tax positions taken by Face Foundrie, any additional income taxes would be imposed on the members rather than the company itself. This means that while the company's financial statements would not be directly affected, the individual members would bear the financial responsibility for any tax adjustments.
The FDD also mentions that Face Foundrie's income tax returns are subject to examination by taxing authorities for three years from the date they are filed. As of December 31, 2024, the 2021, 2022, and 2023 tax years were subject to examination. This is a standard audit window, and prospective franchisees should be aware that the company's tax filings for those years could potentially be scrutinized by tax authorities.