Should I Start an LLC for My Bottled Water Business?

Starting a limited liability company (LLC) for your bottled water 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 bottled water business, lawsuits can arise from things like contract disputes, customer injuries, and even accidentally selling contaminated water.

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

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

Do I Need an LLC for a Bottled Water Business?

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

You should form 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 Bottled Water Business

By starting an LLC for your bottled water 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.

Bottled water businesses will benefit from liability protection because of the risk of product liability, workplace accidents, trademark infringement, and financial data breaches.

Example 1: During the production of a batch of water, the treatment machines are faulty. This poorly treated water is sold to a customer, who drinks it and becomes gravely ill. As a result, the customer sues your business for negligence, arguing that it had not taken reasonable care to prevent this foreseeable harm. Limited liability would prevent any demands for compensation from being imposed on your personal assets, limiting them to your business’s assets alone.

Example 2: While showing a customer around your water bottling factory, they slip on a puddle of water on the floor and suffer a broken wrist. Consequently, the customer sues your business for this bodily harm, maintaining that it is at fault. If the business is found liable to pay damages, limited liability protects you from being personally responsible.

Example 3: You enter into a contract with a local fast-food restaurant to supply them with regular quantities of bottled water. However, this volume soon proves to be too much for your business to produce, and you cannot fulfill your legal obligations. This leads to the restaurant suing your business for breach of contract. Any damages you may be found liable to pay will be limited to the assets owned by your business and cannot extend to you personally.

Example 4: A competing beverage business sues you for infringement, claiming that your company name violates their trademark.

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 Bottled Water 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 bottled water 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

Bottled water 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?

Just like all other businesses, LLCs must have insurance. Bottled water businesses need this insurance to keep their assets (such as your expensive water treatment equipment) protected.

In addition to the protection that insurance provides for a business’s assets, LLCs protect the personal assets of their owners.

Common Situations Business Insurance May Cover for a Bottled Water Business

Example 1: While carrying a bottle of water into a customer’s home, you slip and drop it on the customer’s expensive camera equipment. General liability insurance would pay to repair or replace the customer’s damaged property.

Example 2: During a visit to your office, a client slips on a wet floor and decides to sue your business. General liability insurance would cover your legal defense and any required settlement.

Example 3: As you transport a full water bottle into a customer’s kitchen, you accidentally knock him over. The customer hits his head during the fall, suffers a concussion, and demands you pay for his medical care. General liability insurance would cover the injured customer’s medical treatment.

Other Types of Coverage Bottled Water 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 bottled water businesses should obtain.

Product Liability Insurance

While you strive to produce a safe and delicious product, there’s always a chance someone might claim your product caused them harm. If a customer sues, product liability insurance would cover your legal fees and any required settlement.

Workers’ Compensation Insurance

If you have any employees, most states require you to carry workers’ compensation insurance for both part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

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. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any business materials you carry in your vehicle.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary 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, workers’ compensation insurance, and commercial property insurance.

Read our Bottled Water Business Insurance article for more info.

For the most entry-level bottled water business, you can expect to have to dedicate between $500,000–$750,000 for startup costs alone. Even larger plants can require $1.5 million or more.

These costs will cover the water treatment machines, storage tanks, and water sterilizers, among other necessary equipment.

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

Operating expenses for a bottled water business include plant maintenance, utilities, payroll, and insurance.

Learn more about running a bottled water business.

Bottled water businesses make money by purifying and bottling water and then selling it to customers. These can include both grocery stores and individual buyers.

Learn more about starting a bottled water business.

Successful bottled water businesses can have profits as high as 100% to 500%. Startup costs and logistics for this business are substantial, but there is great profit potential if you are successful.

In addition to standard bottled water, there are a number of other varieties that could help your company stand out. These include flavored water, carbonated water, and alkaline water, to name a few.

Learn more about starting a bottled water business.