Should I Start an LLC for My Meals-to-Go Business?

Starting a limited liability company (LLC) for your meals-to-go business 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 meals-to-go business, lawsuits can arise from things like a customer suffering food poisoning due to your business’s negligence or failing to deliver a client’s meals by the contractually agreed-upon time.

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

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

Do I Need an LLC for a Meals-to-Go Business?

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 Meals-to-Go Business

By starting an LLC for your meals-to-go business, 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.

Meals-to-go businesses will benefit from liability protection because of the risk of product liability, workplace accidents, trademark infringement, libel, and financial data breaches.

Example 1: A new client places a large order for club sandwiches from your business for a company lunch meeting. A delay in the delivery time causes the client to face sanctions at his workplace. If he sues your business, limited liability protection ensures that you are not personally liable for any compensation should the case be settled in court.

Example 2: A mother complains that the pasta in her child's order was not gluten-free. This triggered a severe allergic reaction and a corresponding visit to the emergency room. Citing false advertising and claiming medical compensation, she sues your business. With an LLC structure in place, your personal assets will remain safe from fines imposed by the court.

Example 3: A new employee of yours is unreasonably rude to some customers who came in to pick up their orders. They are offended and seek redress in court, claiming that you are negligent in proper customer service training for your employees. If found guilty, any compensation associated with the lawsuit will only be covered by the business's assets and not your personal assets.

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 Meals-to-Go Business

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 meals-to-go business 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.

Credibility and Consumer Trust

Meals-to-go businesses 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 professional 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.

Meals-to-go businesses need insurance because of the liability that comes with running a business that involves food. Cases of injuries and allergic reactions arising in your day-to-day operations can be covered by insurance policies.

Common Situations Business Insurance May Cover for a Meals-to-Go Business

Example 1: While delivering ingredients, a supplier trips over boxes left on the floor and is hurt in the fall. General liability insurance would probably cover their injuries.

Example 2: An employee trips while delivering a large order of finished pasta to a customer’s million-dollar home. The pasta spills out of the containers, and red sauce goes flying. The customer later sues because their expensive curtains, tablecloth, and carpet were all stained in the incident and are permanently ruined. General liability insurance would probably cover the damage.

Example 3: When conversing with a customer, an employee complains about the food at a local restaurant. The complaint is made in front of several people, and the restaurant owner eventually hears the disparaging remarks. They file a slander lawsuit. General liability insurance would likely cover any legal costs and settlement.

Other Types of Coverage Meals-to-Go 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 meals-to-go businesses should obtain:

Commercial Auto Insurance

All states require businesses that use vehicles on public roads to carry minimum levels of auto coverage. What type of commercial auto insurance your business needs depends on what vehicles the business delivers meals with. Company-owned cars and vans usually must be insured with a traditional commercial auto policy. If deliveries are made via employees’ personal vehicles, a hired and non-owned auto policy might suffice. The latter provides certain protections only when a personal vehicle is used for work (not including commutes).

Commercial auto insurance is often bundled with other coverages in a package policy.

Product Liability Insurance

Product liability insurance offers protection against lawsuits related to products that a business makes or sells. Customers might file a suit if a product causes damage or harm. Food sold to customers meets the insurance definition of a product, which is why this insurance might be appropriate for your meals-to-go business. A policy may help your business if improperly prepared foods spread E. coli, if an unpitted olive causes someone to choke, or in other situations.

Product liability insurance is available through many package policies.

Home-Based Business Insurance

If you run a home-based meals-to-go business, you’ll likely want home-based business insurance. A policy will normally fill in some of the coverage gaps left by a homeowner’s insurance policy, which isn’t really intended to insure a business venture.

Home-based business insurance is available through a BOP, and some insurers offer it as an endorsement that can be added to their homeowner’s policies.

Commercial Property Insurance

If you operate from a company-owned kitchen, a commercial property insurance policy will better meet your business’s insurance needs. This type of policy is commonly used to protect commercial properties and the equipment in them. Professional kitchen equipment is often expensive, so make sure you have enough property coverage to replace all of your stoves, ovens, refrigerators, freezers, fire sprinklers, and other equipment.

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.

Read our Meals to Go Business Insurance article for more info.

If you intend to start a meals-to-go business, $120,000 to $130,000 is the price range for the startup capital required. You'll need to obtain approval from the health department for your kitchen. Then you can factor in the costs of getting a business permit, paying the lease, and sorting out equipment such as ovens, refrigerators, and dishwashers.

Visit our How to Start a Meals-to-Go Business guide to learn more about the costs of starting and maintaining this business.

Some of the main operating expenses for a meals-to-go business are ingredients, insurance, rent for a commercial kitchen, and payroll.

Learn more about running a meals-to-go business.

Meals-to-go businesses make money by preparing and selling meals to customers.

Learn more about starting a meals-to-go business.

Meals-to-go businesses provide already-cooked meals to customers. While many of these businesses offer a wide variety of meals, some focus on specific dietary restrictions like gluten-free or vegan options.

The average meals-to-go business charges between $24 and $28 for two meals.

Learn more about starting a meals-to-go business.