Should I Start an LLC for My Cheese Shop?

Starting a limited liability company (LLC) for your cheese shop 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 cheese shop, lawsuits can arise from things like a customer alleging they became ill after consuming cheese purchased from your shop or from employees suffering injuries while working.

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

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

Do I Need an LLC for a Cheese Shop?

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 Cheese Shop

By starting an LLC for your cheese shop, 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.

Cheese shops will benefit from liability protection because as with any business selling food products, the risk of food contamination is ever-present. Your cheese shop could also face workplace injuries, property damage, and trademark infringement.

Example 1: After a customer claims that he got food poisoning from eating your shop’s cheese, he demands compensation amounting to a week’s worth of loss of income. When you refuse, he threatens to file a lawsuit seeking compensation against your business. Since your cheese shop is registered as an LLC, your personal assets will remain protected regardless of how the lawsuit progresses.

Example 2: You take on a small business loan to purchase a new refrigeration system for your cheese shop, as well as upgrade the lightning. Since you didn’t personally guarantee the loan, limited liability will ensure that you cannot be held personally liable if your business cannot pay it back in the future.

Example 3: After finding moldy cheese in your shop, you fire your head cheesemaker, who responds by letting you know that you are contractually obligated to give her one month’s pay in advance. When you refuse, she threatens to sue you for breach of contract. Since the employment contract was drafted between herself and your LLC, you cannot be found personally liable, regardless of whether a successful claim is made against your cheese shop in court.

Example 4: A customer sues your business, claiming she got severe food poisoning from a product bought at your shop.

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 Cheese Shop

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 cheese shop 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

Cheese shops 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 trusted 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 (including LLCs) need business insurance in order to protect their assets — especially a cheese shop with potentially expensive equipment (e.g., refrigeration systems, POS systems, lighting, cheese inventory, etc.). This is because the limited liability offered through an LLC entity protects the personal assets of its owners only.

If you want your business’s assets to be protected as well, you will need to purchase business insurance.

Common Situations Business Insurance May Cover for a Cheese Shop

Example 1: While a customer walks to your restroom, an employee knocks her over as he turns a corner. The customer breaks an arm in the accident and demands your business pay for her medical treatment. General liability insurance would cover the customer’s medical bills.

Example 2: A customer trips over a broken piece of pavement in your parking lot, injures his knee in the resulting fall, and decides to sue your company. General liability insurance would cover your legal defense costs.

Example 3: A competitor sues your business for compensation, claiming you stole his cheese shop’s logo. General liability insurance would pay for your legal defense costs and any required settlement.

Other Types of Coverage Cheese Shops 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 cheese shops should obtain:

Product Liability Insurance

While you’re proud of the products you sell, there’s always a chance a customer might claim one of your products caused them harm. In the event of a lawsuit, product liability insurance would cover your legal defense costs and any required settlement.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. 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 Property Insurance

You made a major investment in the real estate, equipment, stock, and other supplies for your cheese shop. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as the business materials you store there.

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.

In order to start a cheese shop, you will need the following:

Refrigeration systems
Quality LED lighting
Shelves and display cases
Point of sale software

Your largest maintenance costs will likely be getting high-quality inventory and ingredients, rent, and labor costs (depending on the size of your cheese shop).

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

The operating expenses of a cheese shop can vary depending on the size of the business. Two major expenses would be rent for premises and employee wages. The average workforce size for cheese shops is around 22 employees.

Learn more about running a cheese shop.

Cheese shops make money by selling cheese and possibly other food items.

Learn more about starting a cheese shop.

Cheese shops sell specialty cheeses and cheese produced by artisan cheesemakers. Most of the demand comes from high-end restaurants buying wholesale, but depending on location, cheese shops can also have substantial retail sales.

The average gross profit margin of a cheese shop is usually quite high, with one expert putting the figure at around 80%.

Learn more about starting a cheese shop.