Should I Start an LLC for My Food Truck?

Starting a limited liability company (LLC) for your food truck can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a food truck, lawsuits can arise from things like a customer alleging they got food poisoning after consuming food from your truck, as well as from accruing a substantial amount of unpaid debt.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your food truck seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Food Truck?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Food Truck

By starting an LLC for your food truck, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Food trucks will benefit from liability protection because of the risk that comes along with selling food to customers. Additionally, there are general business risks like potential trademark infringement claims, financial data breaches, and workplace accidents.

Example 1: Your food truck business is contracted to supply lunches to a nearby office block. The customer assumes the meals will be delivered; your understanding was that the meals will be picked up. The customer sues. Regardless of how the matter is resolved, your personal assets would not be at risk.

Example 2: Your food truck business is sued by the garage, which claims you have not paid for a checkup. You haven’t paid because the garage owner orally represented that if you bought tires exclusively from him, checkups would be free. Even if judgment goes against you, your personal assets would be protected.

Example 3: Forced to close your food truck business because of new city regulations, you realize that you are unable to pay off all creditors in full from business assets. Nonetheless, unpaid creditors will not be able to levy against your personal assets, which are protected by the limited liability shield of your LLC.

Example 4: A family with small children gets food poisoning after eating an undercooked meal from your food truck. They sue for damages.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Food Truck

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a food truck owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

For questions about tax solutions for your food truck, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

Food trucks rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a dependable LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Insurance can protect a food truck business when it is at fault for injury suffered by a customer or member of the public. Liability insurance will also cover property damage, legal costs, and harm caused by promotional materials.

LLCs protect personal assets. Business insurance protects business assets.

Common Situations Business Insurance May Cover for a Food Truck Business

Example 1: A business is considering having your food truck parked outside of its building every weekday for its employees. First, the business owner wants to tour your truck. While inside, he trips over a box and breaks his wrist. He asks you to pay for his medical treatment. Your general liability insurance will likely cover this cost.

Example 2: A competitor does not like your latest marketing campaign. He sues you, claiming that you have libeled his business. Your general liability insurance will cover your legal fees.

Example 3: One of your employees is loading supplies into your truck when he accidentally knocks a customer to the ground. She breaks her arm and sues your business. Your general liability insurance will pay for your legal defense, including paying a settlement if needed.

Other Types of Coverage Food Truck Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all food truck businesses should obtain:

Product Liability Insurance

There is always the chance that one of your customers could sue your business, claiming that one of your products caused him or her injury. If this happens, your product liability insurance will pay for your legal fees. It will also pay for a settlement if you need to settle out of court.

Commercial Auto Insurance

Your food truck is a vehicle, and vehicles used primarily for business must be covered by a commercial auto policy. Your policy will pay for damages to your vehicle if you are in an accident, as well as for damage to other vehicles if you are at fault. It will also pay for medical treatments for any injured.

Commercial Umbrella Insurance

An umbrella policy provides extra protection beyond what a general liability insurance policy offers. It is possible for your general liability insurance limits to be exceeded—like if you lose a big lawsuit. If this happens, your umbrella policy will kick and pay until its limits are reached.

Workers’ Compensation Insurance

A workers’ compensation policy is necessary for most states if you have employees. The policy you carry will pay for medical treatment if one of your employees is injured while performing work-related duties. It will also pay for some of the lost wages for the employee if they cannot work due to the injury.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, commercial property insurance, and commercial auto insurance.

Read our Business Insurance article for more info.

To get your food truck business off the ground, you’ll need a customized truck, of course, which will cost at least $20,000. Other setup costs, such as licensing and vehicle exterior design, may add another $5,000. The chief recurring costs would be raw materials, salaries, commercial kitchen fees, and commercial insurance.

Visit our How to Start a Food Truck guide to learn more about the costs of starting and maintaining this business.

Your most consistent ongoing expenses will be for food, gasoline and maintenance, and employee costs (if any).

Learn more about running a food truck.

Food trucks make money by operating as a restaurant on wheels. With a take-out-only business model and no commercial rent to pay, food trucks can potentially see higher profit margins than traditional restaurants.

Learn more about starting a food truck.

A food truck business is essentially a restaurant on wheels. Meals and snacks are served to customers from a truck, van, or trailer. Food trucks are gaining popularity amongst entrepreneurs and customers. The business owner should have culinary talents and the ability to quickly and efficiently serve meals from a contained space.

The average profit margin for a food truck business is about 9%.

Learn more about running a food truck.