Should I Start an LLC for My Pet Food Business?

Starting a limited liability company (LLC) for your pet food 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 pet food business, lawsuits can arise from things like selling pet food cans that contain harmful bacteria or failure to supply vendors according to their contracts.

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

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

Do I Need an LLC for a Pet Food 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 Pet Food Business

By starting an LLC for your pet food 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.

Pet food businesses will benefit from liability protection because of the risk of being sued for workplace injuries, product liability, and false advertising.

Example 1: You are responsible for producing and delivering thousands of bags of pet food to local retailers each month. In the event that one of your trucks is involved in an accident, liability protection will limit any financial damages to only your business assets, protecting your personal assets from any losses.

Example 2: Due to a manufacturing error, several bags of pet food are recalled after reports that they are contaminated with dangerous bacteria. In the wake of this event, your business faces a financial crisis as retailers cancel their orders and customers file compensation lawsuits. Limited liability protection will ensure that only your business is held liable for these losses, protecting your personal savings from any associated financial damages.

Example 3: You have an employee who accidentally damages a customer’s pet food order while packing it for delivery. The customer files a lawsuit against your business, claiming that the damage was due to negligence on behalf of your company. With liability protection in place, your personal assets will be protected from any legal action taken by this client.

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 Pet Food 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 pet food 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

Pet food 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.

Pet food businesses need insurance to protect themselves financially in case of unexpected losses. Insurance can help cover the costs of any damages or liabilities, such as a product recall that could result from an inability to guarantee the safety and quality of their products.

Common Situations Business Insurance May Cover for a Pet Food Business

Example 1: When delivering supplies to your facility, a driver accidentally trips over packages on the floor and sustains multiple injuries. General liability insurance would cover the driver’s medical bills and your legal fees in the event of a lawsuit.

Example 2: While visiting your production facility, a customer reaches into a piece of machinery and severely injures themselves. General liability insurance would cover the customer’s medical bills.

Example 3: When customers find false claims on your company’s packaging and website, they file a class-action lawsuit for false advertising. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Other Types of Coverage Pet Food 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 pet food companies should obtain:

Product Liability Insurance

When you sell products to the public, there’s always a chance a customer may file a lawsuit if they believe one of your products caused harm — such as if a contaminated batch of pet food sickens many pets. Product liability insurance would protect your business by covering your legal fees and any damages awarded in a settlement.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. This includes any personal cars you may drive while making deliveries because personal auto policies won’t cover work-related accidents. Be sure to select a policy that covers accident-related vehicle repair costs as well as the medical treatment for anyone injured.

Commercial Property Insurance

If your company owns a commercial or industrial facility, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your equipment, product inventory, and supplies after an accident so you can recover quickly.

Home-Based Business Insurance

If you operate a smaller pet food company and prepare food in your home, check with your homeowner's insurance provider to ensure your policy protects you against liability from business-related accidents. If not, consider adding home-based business coverage to your business owner policy (BOP) or your existing home insurance policy.

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 Business Insurance for Pet Food Companies article for more info.

Starting a pet food business requires little capital as you can assemble the food in your kitchen. Aside from licensing fees, most of your capital will go towards buying raw materials and renting a booth at a farmers market to sell your products. You can also cut costs by purchasing materials from wholesalers and selling your products through established retailers.

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

Ongoing costs may include the cost of additional ingredients for making more food, as well as shipping and delivery fees.

Learn more about running a pet food business.

Pet food businesses make money by selling pet food, either directly to customers or to retailers.

Learn more about starting a pet food business.

Pet food businesses provide food options for pet owners. While some businesses may sell all kinds of pet food, it’s not uncommon to find businesses that specialize in pet food for specific animals such as dogs or cats.

Pet food businesses can see profit margins as high as 40% on an annual basis.

Learn more about starting a pet food business.