Do I Need an LLC for My Grocery Delivery Business?

Starting a limited liability company (LLC) for your grocery delivery 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 grocery delivery business, lawsuits can arise from things like a delivery driver getting into a traffic accident while working.

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

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

Should I Start an LLC for My Grocery Delivery 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 Grocery Delivery Business

By starting an LLC for your grocery delivery 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.

Grocery delivery businesses will benefit from liability protection because of the risk of personal injuries or property damage caused by their employees.

Example 1: A customer's order is delivered to the wrong address and cannot be retrieved. Following this, the customer sues the grocery delivery business for damages. Without liability protection, the owner's personal assets could be at risk if the business is found liable.

Example 2: A customer's order is delivered late, and the customer is dissatisfied with the service. The customer sues the delivery business for damages, claiming that the late delivery caused them financial loss. Liability protection will ensure that the owner’s personal assets remain protected if the business is found to be guilty.

Example 3: A customer places an order for a large number of perishable items, but due to a miscommunication with the store, the items are not properly refrigerated during the delivery process. Following this, the customer proceeds to sue. In this scenario, liability protection will ensure that the owner’s assets remain protected.

Example 4: One of your drivers hits someone’s car while making a delivery. In addition to paying for any damages to your business’s car, you are asked to cover the damages of the other car.

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 Grocery Delivery 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 grocery delivery 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

Grocery delivery 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 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?

Yes, all businesses need insurance. Accidents and lawsuits can pose a significant threat to the financial and operational stability of a business, and having insurance can help to safeguard against these risks.

Common Situations Business Insurance May Cover for a Grocery Delivery Business

Example 1: As one of your delivery drivers carries a heavy box of groceries to a customer’s front door, he drops the box, and the impact breaks the customer’s foot. She asks you to pay for her medical treatment. General liability insurance would cover her medical expenses.

Example 2: While moving a large number of heavy goods from his truck to a customer’s house, one of your drivers loses control of the dolly, and it slams into the customer’s vehicle. General liability insurance would pay to repair the customer’s damaged property.

Example 3: A competitor sues your business, claiming your last marketing campaign libeled his company. While you disagree with the claim, you know you need an attorney to defend yourself. General liability insurance would cover your legal defense costs.

Other Types of Coverage Grocery Delivery 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 grocery delivery businesses should obtain:

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your delivery drivers and other 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 workplace 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 Property Insurance

You made a major investment in the delivery vehicles and other equipment needed to establish your business. 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, vehicles, and other business materials.

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 auto insurance.

Read our Business Insurance for Grocery Delivery Businesses article for more info.

Starting a grocery delivery business may require a significant investment in technology and insurance for drivers, as well as a budget for marketing. Inventory and supplies might not take up much cost since you will be delivering what has already been ordered.

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

Grocery delivery businesses have to pay for salaries, gas, insurance, and equipment maintenance. In addition, they need to spend money on updating their technology.

Learn more about running a grocery delivery business.

Grocery delivery businesses charge a membership fee and a markup on the food items customers buy. In addition, they may charge other fees based on how much food customers order or where customers’ homes are located.

Learn more about starting a grocery delivery business.

A grocery delivery business delivers people’s food to their homes. They typically work with grocery wholesalers to supply a wide selection of food. Grocery delivery businesses also may offer additional services. These can include, for example, meal-planning services.

If it operates in the right location, a grocery delivery business can make a good profit.

Learn more about starting a grocery delivery business.