How is Mrcool taxed under the Internal Revenue Code?

According to Mrcool's 2025 Franchise Disclosure Document, the company has elected to be taxed as a Partnership under the Internal Revenue Code and applicable state statutes. This means that the income of Mrcool flows through to its members, who are then taxed at the individual level, rather than the company being taxed at the corporate level. As a result, Mrcool itself will not have any federal or state tax liability. However, Mrcool is still responsible for state and local license fees, which are based on either profitability or revenues.

This pass-through taxation structure can be advantageous for franchisees, as it avoids the double taxation that can occur with corporations (where profits are taxed at the corporate level and then again when distributed to individuals). However, it also means that the franchisee will be directly responsible for paying income taxes on their share of Mrcool's profits, regardless of whether those profits are actually distributed to them. Franchisees should consult with a tax advisor to understand the full implications of this tax structure for their individual circumstances.

It's important to note that while Mrcool itself avoids federal and state income tax liability, it is still responsible for state and local license fees. These fees, based on profitability or revenues, can impact the overall financial performance of the franchise. Prospective franchisees should inquire about the specific state and local license fees applicable to their location to fully understand the potential costs associated with operating a Mrcool franchise.