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5 Tax Strategies to Help Franchise Owners Save Big in 2024

By on Dec 13, 2024

You didn’t start your franchise to spend your time buried in tax forms and spreadsheets. You started it to build something extraordinary—to serve your customers, grow your team, and focus on what truly matters. Yet, at the end of the year, taxes have a way of stealing the spotlight. At Ledge Accounting, we believe there’s a better way—a smarter way. Tax planning doesn’t have to be about stress and uncertainty. It can be about strategy, clarity, and opportunity. Here’s how franchise owners can save big before the end of 2024.

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1. Convert to an S-Corporation and Keep More of Your Hard-Earned Money

Every dollar you save on taxes is a dollar you can reinvest into your business. For many franchise owners, converting to an S-Corp unlocks that potential. By structuring your income as a mix of salary and distributions, you reduce the amount subject to self-employment tax.

Example:

  • A franchise owner earns $100,000 in net income.
  • As a sole proprietor, the entire $100,000 is taxed at 15.3% for self-employment taxes—$15,300.
  • As an S-Corp, you might pay yourself a $60,000 salary (taxed at 15.3%) and take the remaining $40,000 as a distribution (not subject to self-employment tax).

Savings Calculation:

  • Self-employment tax on salary: $60,000 × 15.3% = $9,180.
  • The $40,000 distribution avoids self-employment tax.
  • Savings: $15,300 - $9,180 = $6,120 annually.

2. Leverage Section 179 to Turn a Vehicle Into a Tax Deduction

Every business tool should work for you—and that includes your vehicle. Section 179 allows you to deduct the full purchase price of a qualifying business vehicle, putting cash back in your pocket.

Example:

  • You purchase a $50,000 SUV used primarily for business.
  • Under Section 179, you deduct the entire $50,000 in the year of purchase.
  • Assuming a 24% tax bracket: $50,000 × 24% = $12,000 saved.

This isn’t just a deduction—it’s an investment that reduces taxable income while helping you stay efficient.

3. Don’t Overlook the Value of Your Franchise Fee

The franchise fee you paid upfront isn’t just a sunk cost; it’s a hidden opportunity. Many franchise owners miss this deduction because the fee is paid personally and not flagged for amortization. When properly handled, this fee can provide consistent tax savings over the life of your franchise agreement.

Example:

  • A $30,000 franchise fee paid for a 10-year agreement.
  • Annual deduction: $30,000 ÷ 10 = $3,000.
  • Tax savings (24% bracket): $3,000 × 24% = $720 annually.
  • Total savings over 10 years: $720 × 10 = $7,200.

4. Deduct the Investments You Made Before Opening Your Doors

The path to opening your franchise is full of investments—training, site visits, marketing. These aren’t just costs; they’re opportunities for deductions. The IRS allows you to deduct up to $5,000 in startup costs in the first year and amortize the rest over 15 years.

Example:

  • You spend $20,000 on pre-opening expenses.
  • Deduction: $5,000 in the first year + $15,000 amortized over 15 years ($1,000 per year).
  • Tax savings (24% bracket) in the first year: $6,000 × 24% = $1,440 saved.

This isn’t just about reducing taxes—it’s about recognizing the investments that set your foundation for success.

5. Build Your Future While Saving Today

A retirement plan like a SEP IRA or Solo 401(k) is more than just a smart financial decision; it’s a tool for significant tax savings. Every contribution reduces your taxable income, letting you keep more now while planning for tomorrow.

Example:

  • You contribute $10,000 to a SEP IRA.
  • Tax savings (24% bracket): $10,000 × 24% = $2,400 saved.

This isn’t just about taxes—it’s about creating a secure future that works as hard as you do.

Smart Tax Strategies Are Game-Changing

Imagine what you could do with the savings from these strategies:

  • $6,120 from an S-Corp conversion.
  • $12,000 using Section 179.
  • $720 annually from amortizing your franchise fee.
  • $1,440 in year one from pre-opening expense deductions.
  • $2,400 by contributing to a retirement plan.

These aren’t just numbers. They’re opportunities—dollars you can reinvest into growing your franchise, supporting your team, or pursuing the vision that got you started.

Build Something Extraordinary with Ledge Accounting

Great businesses are built on clarity and focus. By taking control of your taxes, you unlock the potential to grow and thrive. At Ledge Accounting, we’re here to make it simple, actionable, and transformative.

Let us help you see the possibilities in your numbers.

Book a Free Consultation with Ledge Accounting today to take control of your tax strategies.

Because the future of your franchise isn’t just about saving money—it’s about building something extraordinary.

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