Should I Start an LLC for My Health Food Store?

Starting a limited liability company (LLC) for your health food store 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 health food store, lawsuits can arise from things like false advertising claims (e.g., about the benefits of your products, etc.), large refund disputes with a vendor, or breaching your lease’s contract.

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

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

Do I Need an LLC for a Health Food Store?

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 Health Food Store

By starting an LLC for your health food store, 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.

Health food stores will benefit from liability protection because food and beverage businesses face diverse risks from product liability and trademark infringement to regulatory sanctions.

Example 1: Your store sells raw, organic produce. One day, a customer slips on a wet floor and suffers a major injury. The customer decides to sue your business for negligence and is awarded damages. Even though your business can be held liable for this incident, limited liability protects your personal assets from the payments awarded to the customer.

Example 2: You own a health food store that prepares and provides fresh, wholesome meals. One day, there is an outbreak of salmonella in your kitchen, and you are forced to close for a week as the authorities investigate. A few employees sue your business for lost wages due to the closure. Even though your business may be liable for this incident, limited liability protects your personal assets from the financial costs of the lawsuits.

Example 3: As a health food store owner, you are also concerned about data security. You take measures to protect private customer and business information from being stolen or misused, but one day a data breach occurs and costs your business thousands of dollars in lawsuits. Limited liability can shield your personal assets from the resulting financial loss incurred in the lawsuit.

Example 4: A customer sues your business, claiming that a product you sold them caused a severe allergic reaction and did not clearly list all of the ingredients.

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 Health Food Store

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 health food store 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

Health food stores 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.

Health food stores need insurance for protection against potential liabilities. Without insurance, a health food store could face costly lawsuits if someone were to suffer an injury or illness due to their products. Insurance also protects against damages caused by theft, fire, and other disasters that can occur at any time.

Common Situations Business Insurance May Cover for a Health Food Store

Example 1: While delivering food items to a local restaurant, your driver backs into the restaurant owner, injuring his leg. The owner is suing you for associated medical bills. A general liability policy should cover the cost of his medical bills and other costs associated with the lawsuit.

Example 2: During a rainy day, mud is tracked into the store, causing a customer to slip and fall. He decides to sue your company. Your general liability policy should cover your legal fees, the customer’s medical bills, and any additional damages they are seeking up to the limits of the policy.

Example 3: Your delivery driver accidentally leaves a customer’s freezer door open, causing the loss of thousands of dollars worth of merchandise. General liability insurance should cover the cost of replacing the merchandise and repairing the freezer, which broke during the incident.

Other Types of Coverage Health Food Stores 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 health food stores should obtain:

Commercial Property Insurance

Commercial property insurance covers the cost of repairing or replacing property, including owned real estate and equipment if it is damaged in a covered event. This coverage is typically available as part of a business owner’s policy.

Product Liability Insurance

Product liability insurance offers protection against lawsuits if customers claim they were harmed by a product that you make or sell. It can cover legal defense fees and any necessary payouts.

Workers’ Compensation Insurance

Workers’ compensation insurance, which covers on-the-job injuries and illnesses, is required by most states if your business has employees. In addition to medical bills, this policy provides you with legal defense and helps support an employee while they are out of work from the injury.

Commercial Umbrella Liability Insurance

General liability insurance will cover the cost of most incidents that your business faces. However, there are certain cases where your general policy’s limits may be reached, like in the event that you lose a big lawsuit. Commercial umbrella insurance will kick in and cover excess damages once your general policy is exhausted.

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, commercial property insurance, and workers’ compensation insurance.

Read our Business Insurance article for more info.

Opening a health food store can involve a variety of costs, such as cash registers, inventory, staff, and leasing storefront space. The buildout costs for the storefront will vary depending on the size and geographic location of the store. Additionally, shelves — including refrigerated and freezing options — must be purchased in order to display products properly.

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

The ongoing expenses of running a health food store include permits, rent, maintenance, inventory, labor, utilities, and overhead expenses.

Learn more about running a health food store.

Health food stores make money by selling their products to customers.

Learn more about starting a health food store.

The average net profit margin for a health food store is 7%. Increased adoption of healthy eating habits offers immense potential for health food stores.

With more consumers purchasing groceries online, ecommerce presents the main growth prospects for this type of business. Product innovations and aggressive marketing strategies also remain key to the success of any health food store business.

Learn more about starting a health food store.