Hey there, Vendpreneur!

Welcome to Becoming a Vendpreneur—where every week I help you navigate the challenges of running a vending machine business, whether you’re just starting out or looking to expand your operation.

This week, we're diving into the tax benefits of owning vending machines and 4 tactics to minimize your tax liabilities. Here’s what we’ll cover:

1. Opting for an LLC as your business structure

2. Maximizing your deductions

3. Strategically timing your expenses

4. Leveraging tax credits

But before we jump into more details, I want to share a few quick updates on my vending businesses, Pod Plug and my new one, Vending Machine LaunchPad.

Business Updates

• 🤝 Finalizing terms with a major lending partner to provide financing and lease-to-own options for our future franchisees' machines.

• 🎓 Brought on two stellar interns: a UT Austin student as our Campus Recruitment Specialist for college towns (bar managers, we're coming for you!), and an LA high school senior to help launch locally with his extensive network.

• 🎥 Welcomed Drew, our first video editor, to the team. I’m filming my first video this weekend - stay tuned for some great content!

• 💰 Wrapped up 4 promising investor meetings. We might secure another $200k by month's end. Things are heating up!

• 🤖 Installed a new machine in Dallas this week. Projected monthly revenue: $3k. Not too shabby!

• 🚀 After 4 months of hard work, Vending Machine LaunchPad is live and thriving! We've got 17 new entrepreneurs on board. Only 8 spots left at the special $2,000 discount price. Offer ends Tuesday, so don't miss out - regular price is $2,997. Sign up below! 👇

Now, let’s dive into this week’s newsletter!

🔗 Best Links

Curated picks for Vendpreneurs

📱 Top Reads

• Interest in vending machine ownership spikes; a survey of 20+ operators shows just how much they're making. 💰 (The Hustle)

• With seven million machines across the U.S., that's one for every 50 Americans. Discover more fun facts. (Vending Locator)

🛠️ Must-Have Tool

• Streamline everything from state registrations to tax filings, a must-have for every vending biz owner with employees stocking machines (AKA route drivers). 🔄 (Gusto)

😱 Trending Now

• Dallas rolls out free condom vending machines. 🆓 (Prism Health North Texas)

• Book and media vending machines are popping up everywhere. 📚 Would you buy your next read from a vending machine? 📚 (Tiktok)

Owning vending machines offer more than just income.

They provide valuable tax benefits.

Tax strategies are one of the easiest ways to boost your bottom line.

In this issue, I’ll break down simple, actionable tips to lower your tax bill.

No complicated jargon. Just clear steps you can use to keep more money in your pocket.

Ready to take control of your taxes?

Let’s dive into how vending machine ownership can work in your favor.

Tax savings start here. 👇

Tax Strategy #1: Select the Best Business Structure

Selecting the right business structure is crucial for your vending machine business. It affects your taxes and overall profitability.

Here’s a breakdown of the main structures:

1. Sole Proprietorship - Simple to manage. You report your business income and expenses on your personal taxes. However, it offers no liability protection, exposing your personal assets to risk. Plus, it usually results in higher self-employment taxes.

2. Partnership - Partnerships also allow income to pass through to your personal tax returns, but still involve personal liability. This means your personal assets could be at risk.

3. Limited Liability Company (LLC) - LLCs offer the best of both worlds: pass-through taxation and liability protection, safeguarding your personal assets from business debts. You also have the option to be taxed as a corporation, which can lower self-employment taxes.

Why Choose an LLC?

• Avoid Double Taxation: Profits are taxed once on your personal return, simplifying your tax process.

• Tax Flexibility: You can choose how you’re taxed—similar to a sole proprietorship, partnership, or S-corporation. This flexibility can significantly lower your tax liability.

• Protect Personal Assets: LLCs provide a barrier between your business debts and personal finances, keeping your personal assets like your home and savings secure against business issues.

• Boost Credibility: Operating as an LLC can increase your business’s credibility, helping you secure better financing options and attract investors.

The Business Owner Advantage

Taking a page from one of my all time favorites, Rich Dad Poor Dad, transitioning from being an employee to owning a business fundamentally changes how much you pay in taxes.

As an employee, taxes are taken out of your earnings first, leaving you to manage your personal expenses with whatever remains. However, as a business owner, the scenario shifts:

• Deduct Before Taxes: Your business pays you, and you can write off many expenses before taxes, which lowers your taxable income.

• More Deductions: You can deduct loads of business-related expenses, which means you pay less in taxes.

Choosing an LLC and leveraging these tax perks can make a huge difference, saving you money on taxes and protecting your assets better than if you were an employee.

Tax Strategy #2: Maximize Deductions

Lowering your taxable income is crucial.

Here’s how to boost your vending machine business's profitability by maximizing deductions:

What to Deduct?

• Inventory Costs: Fully deductible. This includes everything from snacks to shipping fees.

• Maintenance and Repairs: Deduct costs for keeping your machines running smoothly, including routine upkeep and cleaning supplies.

• Utilities: Deduct utilities for spaces housing your machines, like electricity and water.

• Rent or Lease Payments: If you’re renting space or leasing machines, these are deductible.

• Insurance Premiums: Deduct premiums for any insurance protecting your operations.

• Mileage and Travel Costs: Deduct costs for refilling machines and any related travel expenses, like lodging and meals (note the 50% limit on meal deductions).

Writing Off Depreciation of Vending Machines/Equipment

Vending machines and their components are considered capital assets that depreciate over time.

You can write off this depreciation as a deduction on your tax return:

• Section 179 Deduction: Deduct the full price of your vending machines in the year they’re placed in service.

Tax Strategy #3: Optimal Timing of Expenses

Strategically timing your expenses can significantly impact your taxable income and overall tax liability for your vending machine business. Here’s how to nail it:

Benefits of Year-End Purchases:

• Slash Taxable Income: Buying new machines or upgrading old ones at year-end can lower your taxable income.

• Section 179 Deduction: Deduct the full price of equipment bought or financed during the year, offering a big tax break now rather than later.

• Manage Cash Flow: Gear up for a profitable year. Buy now to meet future demand and reduce your current tax hit.

Smart Timing for Repairs and Upgrades:

• Plan Your Maintenance: If machines need work soon, do it before the year ends to claim those expenses now.

• Upgrade Smartly: Make tech improvements at year-end to boost your operations and grab those tax deductions.

• Prevent Future Costs: Handle repairs now to avoid bigger bills and higher taxes next year.

Strategic Expense Examples:

• Buy in Bulk: Stock up in bulk to save money and increase deductions.

• Prepay Costs: Pay early for things like insurance or rent to deduct them now.

• Boost Marketing: Launch promotions before year-end to deduct costs and boost sales.

Timing is everything. Use it to control your taxes and cash flow, and always keep a tax professional in the loop.

Tax Strategy #4: Leverage Tax Credits

Using tax credits can dramatically improve the financial health of your vending machine business.

These credits can lower your tax bill, boost cash flow, and free up funds for further investment.

Key Tax Credits for Small Businesses:

• R&D Tax Credit: Ideal for those innovating with new products or improving existing ones. You can claim a portion of costs like wages and supplies.

• Work Opportunity Tax Credit (WOTC): Earn credits by hiring from specific groups facing employment barriers. A great way to reduce taxes while expanding your team.

• Small Business Health Care Tax Credit: If you provide health insurance to your employees, this credit lets you deduct part of the premium costs.

Local and State Business Incentives:

• Local Economic Development Incentives: Check for local tax breaks like property tax abatements or sales tax exemptions on new equipment.

• State-Sponsored Programs: Look into grants or loans for businesses contributing to job creation or environmental sustainability.

By strategically leveraging tax credits, you not only save on taxes but also position your business for sustained growth and efficiency.

And That’s a Wrap!

Thanks for reading this week’s newsletter.

Hit reply and let me know what you found most helpful this week—I read every single reply and I’d love to hear from you!

See you next Saturday!

-Ethan

Whenever you're ready, here are 3 free resources that can help you:

1. 📚 Ultimate Guide to Starting a Vending Machine Business: a 90-page comprehensive and actionable guide on kickstarting your vending empire.

2. 🎭 Cold Call Scripts: Boost your confidence and convert conversations into contracts with my field-tested approach to reaching out to potential vending locations.

3. 📄 Location Contract Template: Now once you’ve secured your prime spot using the cold call scripts, it’s time to use my lawyer-built contract template. All your bases will be covered here.