Transcription
One of the most common questions I consistently get asked is how to set up a proper LLC for a vending machine business. Today, I'm going to break down exactly how to do this the right way, protecting both you and your asset. I help hundreds of people structure their vending machine businesses legally, and I'm going to show you the exact process we use. My name is Mike Hoffman, and this is your step-by-step guide on how to set up an LLC for your vending machine business.
Chapter One: Why You Need an LLC
When you get going down the vending path, what you'll really start to realize with things is you want to limit your liabilities, but you also want to maximize your tax advantages. And this is the beauty in vending, because there's all kinds of tax advantages with depreciation of machines and all the tax write-offs, but it all starts with an LLC. So, as you get going here with a vending route, it's really important to set up an LLC so then all of your liability protections are through the company level and not at your personal level. Okay? And this is why, for me, it was super important to get going on an LLC because I wanted the assets associated with that, but also I wanted the tax advantages of being able to pass through different things, whether that's pay expenses, deductions through the company and not my personal bank statements or my personal tax statements.
Some common legal risks when it comes to an LLC in vending are going to be the things you think about with regards to that 700-lb machine falling on someone, or you being liable for any products that are contaminated or expired that someone eats or drinks out of your machine. By having that business protection, it's super, super important when it comes to liability.
Chapter Two: Choosing Your LLC Name
When it comes to naming, when you file your LLC, they're going to have you often times file three different names in case one of your ideas is already taken with that state. So, for me, when I filed mine, I did three different names, and the big thing I wanted it to be is I wanted it to be vague and futuristic. So, if you think of our national account, Modern Amenities, the whole point of that was not to be just vending, because now with unattended retail in the future of it, it's truly an amenity, and so we wanted it to be more of a global solution as your business evolves with the industry evolving. So, a lot of times you think about the vending word; some people might think vending means the old-school machines, even though you're actually doing a lot of smart machines and even micromarkets. For example, if you say your name is DC Vending, and in reality, you send an email on behalf of DC Vending, someone might get that email and see the "V" and think of that big, bulky machine, even though you're trying to pitch them on a micromarket or a more modern concept. You don't want to limit yourself when you think of your brand protection and positioning yourself accordingly, both with the LLC name, but also protecting yourself as you scale with the industry scaling.
Chapter Three: State Selection
Where should you actually file your LLC? This, to me, is an interesting question, similar to what type of machine manufacturer do you recommend. At the end of the day, it's going to decide ultimately on what your preferences and what kind of risk you have. For me personally, I don't want to go to court in some state because, "Oh, I want to file in some random state," let's say Delaware or Wyoming, even though I live on the coast. To me, the juice just wasn't worth the squeeze. So, I actually filed my LLC in the state I live in for those reasons. But I think it's also, you know, some people are a little more interested in taking risks and trying to get those state benefits from one state versus the other, so they'll actually take those risks that I'm not really used to taking. So, I think at the end of the day, when you're trying to figure out your state to file your LLC, you got to think through those different questions and concerns about what actually is driving you where to file, to which state. So, I'm a big believer in just filing where I live, because if I ever have to go to court or anything, it's more of a convenience factor. But there are definitely other factors and other advantages to filing in other states, like Wyoming, Florida, etc., Texas, that just didn't ultimately tip the scale for me to file outside of the state I live in. All right.
Chapter Four: Actually Filing Your LLC
So here, what we're going to do is we're going to go through how to file your first LLC. So, there's multiple websites out there; you can even see what different websites' costs are. So, in this case, what we're going to do is I used Incfile to file my LLCs. Now, they're a new company called Busy, but you can see here if you're curious what, what does it cost to file an LLC with Busy, and you can get your answers um, right away. I think it's like 200 bucks. In this case, it's $0, and then depending on the documents you have—standard versus premium—they have different examples, and you can get add-ons, which I highly recommend, like an EIN or stuff. But literally just go here, hit "Get Started," and you can just start filing an LLC. It didn't take me long. You literally pick your entity type; let's say we're going to do it in Alabama, and then you'll see the different things and how long it takes. So, I did premium because I like to have it next day, especially as you start to get contracts out there with property groups and stuff. But you'll get an agent service. The big thing is you're going to get your Articles of Organization, which is really important. Uh, you can get expedited filing, business contract templates, EIN business tax number, operating agreement, which is going to be important. Um, I usually don't get all these extra add-ons, uh, but you definitely can. Phone, email support, tax consultation. So, in this case, if you do their standard, you're looking at 435; if you do the basic with the Alabama state fee, 236. Keep in mind this factors in the state. So, if I switch states here and I go to Arkansas, I'll just pick, pick another random one—Florida is only 125 bucks. So, that standard with all these items is actually only $324 with your Florida state fee. So, once you get going on this, if we hit "Get Started," this is what I was talking about earlier where you can put in your company name. If it's unavailable, uh, they're going to come back to you and give you more options, uh, to file. But yeah, you can do a company name, then you can also do a DBA as well, set your DBA however you want, and before you know it, this will be shipped off and filed with the state, and then you'll get an approval letter with all those articles from the state through Busy, uh, so I highly recommend using a tool or talking to your accountant to help you with or your lawyers to help you with filing, uh, because it will speed things up so much quicker.
Chapter Five: After Formation
Now that you get your LLC, it's really time to build this business. The first thing you need to do, if you didn't submit this with your LLC, is you need to get an EIN number from the IRS. This application process you can do yourself, or you can just submit it as part of the LLC submission like I went over in the last chapter with Busy, where they'll give you an EIN number for you depending on which package of submission you do with them. The other thing it's really important to start doing is setting up a business bank account. I always like to set up both a business checking account, in case you ever have to drop off checks for revenue share, but then I also like to have a business credit card, because if you think about it, there are a lot of expenses now that you have an LLC that are going to be deductible with your taxes. You grab that coffee on your way into the office; if you're drinking that coffee at work, that's a deduction. You grab that lunch to bring near your desk to do a work lunch while you're working; that burrito is going to be deductible. So, all those random expenses, it's way easier to just have a business credit card where all those expenses sit, and then you can ultimately track those at the end of the year when you're with your accountant. Once those deductions are calculated, it will be way less messy than trying to do those with your personal cards. The other thing you're going to have to start thinking about with your LLC is going to be insurance. I don't really recommend getting anything outside of the typical general liability insurance to start out, but when you start getting into conversations with properties around contracts, they're going to have insurance requirements. One type of insurance you should really consider getting when you get your first machine is going to be Marine layer insurance. Marine layer insurance is going to be the insurance of the machine. So, if that machine got broken into that you have at some apartment complex, your general liability isn't going to cover any of the theft at that machine, but if you have Marine layer insurance, it will cover the theft up to whatever your policy is. So, insurance can be a really valuable asset; insurance is so cheap—like I think we pay maybe 20 or 30 bucks a month for all of our insurance—so it can be really an asset that you definitely want to get buttoned up once you've filed your LLC. Once you've got your insurance figured out, the other thing I like to recommend is an expense tracker. There's definitely different tools out there; Expensify is really cheap, which will really pull in all your receipts; you get all the different things, mileage to and from machines, car, whatever the categories are you deem fit for different expenses. But those expense trackers can really make your life easier when you go meet with your accountant at the end of the year to file your taxes and start to leverage those deductions that you're going to get from both all of the accelerated depreciation from the machines, but also all the daily expenses that come from just running a business that you don't even think of.
So now you know how to exactly set up your vending machine business the right way, legally. But here's the thing: this is just one piece of the puzzle. Inside our Vendingpreneurs Community, we don't just help you with the legal setup; we provide you with everything you need to build a successful vending machine business. We have dedicated modules on legal structure, accounting, and tax strategies specifically for vending operations. If you want to fast-track your success and ensure you're building your business on a solid foundation, click the link in the description to book a call with our team. We'll show you exactly how we can help you build a profitable and well-run vending machine business. Thanks for watching; Mr. Passive signing off.