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Ok...I wanted to post here to get the quickest feedback :)

Basically I want to set up a structure where CompanyA, LLC wholly owns CompanyB, LLC. CompanyB, LLC is a franchise and royalties are paid to the franchising company on revenue. Also the Franchise does not allow us to do any other business than what it does.

Can the profits(after expenses and royalty payments) flow from CompanyB to CompanyA tax free? And then have a distribution in CompanyA to all its partners and each pay there taxes accordingly? Can CompanyA choose not to distribute the profit, but instead invest in capital investments (such as a new building, commercial real estate, so on)?

Yes I will consult a local tax attorney, and post what he/she says...but wanted feed back here first because it may take some time.

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