Should I Start an LLC for My Healthy Fast-Food Restaurant?

Starting a limited liability company (LLC) for your healthy fast food restaurant 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 healthy fast food restaurant, lawsuits can arise from things like a customer claiming they got ill after consuming food from your restaurant or false advertising allegations (e.g., about the healthiness of your food).

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

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

A split plate split in half, one side with spinach and the other with a burger and fries

Do I Need an LLC for a Healthy Fast-Food Restaurant?

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 Healthy Fast-Food Restaurant

By starting an LLC for your healthy fast-food restaurant, 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.

Healthy fast-food restaurants will benefit from liability protection because food and beverage businesses face diverse risks from product liability and trademark infringement to burns, scalds, and other general business risks.

Example 1: A customer slips and falls on a wet floor in your restaurant and files a lawsuit against your business for negligence. Limited liability protection can help protect your personal assets in the event you are found liable for the customer's injury.

Example 2: A food delivery company mistakenly delivers spoilt food to your restaurant, which leads to several instances of food poisoning for your customers. In the event of a lawsuit, Limited liability protection can help protect your personal assets from the damages you would owe to your customers if you were found liable for this incident.

Example 3: A hacker gains access to your restaurant's financial records and steals customer credit card information. Limited liability protection can help shield your personal assets from any legal ramifications that may arise from this data breach.

Example 4: A customer sues your business, claiming that you make false claims about your food’s health benefits.

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 Healthy Fast-Food Restaurant

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 healthy fast-food restaurant 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

Healthy fast-food restaurants 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.

Healthy fast food restaurants need insurance to protect their business in the event of a claim. For example, insurance can help reimburse costs if an employee is injured on the job or if property is damaged due to a fire.

Common Situations Business Insurance May Cover for a Healthy Fast Food Restaurant

Example 1: One of your employees spills food on a client’s expensive purse, damaging it beyond repair. General liability insurance would pay to replace the patron’s damaged property.

Example 2: While an employee collects supplies to clean up soda spilled by a guest, another patron slips on the wet floor and injures himself. Even though your employee displayed a warning sign near the spill, the injured patron sues your restaurant. General liability insurance would pay for your legal fees and any damages awarded in the lawsuit.

Example 3: After you rebrand your business as part of a new marketing campaign, a local competitor files a lawsuit against you. He claims your new slogan is too similar to his and that he’s lost business as a result. General liability insurance would cover your legal defense costs and any awarded damages.

Example 4: In order to secure a loan to turn your business into a franchise, your bank requires you to carry at least $1 million in general liability insurance. A general liability policy would ensure you meet that requirement.

Other Types of Coverage Healthy Fast Food Restaurants 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 healthy fast food restaurants should obtain:

Commercial Property Insurance

You made a major investment in the real estate, build-outs, and equipment necessary to establish your restaurant. 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 and the business materials stored there.

Product Liability Insurance

Product liability insurance offers protection to businesses that manufacture, supply, or sell products — including food. If a patron names your business in a lawsuit because they claim they became ill after eating at your restaurant, product liability insurance would cover your legal fees 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 workplace accident. For extensive injuries resulting in lawsuits, this type of policy also covers a business owner’s legal defense costs.

Business Interruption Insurance

If you need to close your restaurant temporarily after a fire, severe storm, or other covered events, it could take weeks, months, or even years to complete the necessary repairs. Business interruption insurance helps cover your expenses and lost revenue until you can reopen.

You can typically purchase this coverage as part of a business owner's policy (BOP).

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 Healthy Fast Food Restaurant Business Insurance article for more info.

Opening a healthy fast food restaurant requires much more than just a building or space to lease. You will need to purchase equipment such as cash registers, ovens, refrigerators, and cookware, in addition to inventory for the menu items. Insurance, utilities, employee wages, and advertising costs are also part of the equation.

Visit our How to Start a Healthy Fast-Food Restaurant guide to learn more about the costs of starting and maintaining this business.

The ongoing expenses of running a healthy fast-food business include marketing, rent or mortgage payments, equipment maintenance, utilities, insurance, employee salaries, and permits.

Learn more about running a healthy fast-food restaurant.

Healthy fast-food businesses make money by selling high-quality, delicious, and nutritious foods to their customers.

Learn more about starting a healthy fast-food restaurant.

The growing health concerns among fast-food consumers create an opportunity for healthy fast-food businesses. Healthy fast-food businesses have the potential to dominate the market if they can deliver on taste, price, and speed in addition to their nutritional claims.

Generally, fast-food businesses operate on a very thin profit margin. To remain in business, healthy fast-food restaurants should aim for the industry’s average profit margin of 3%.

Learn more about starting a healthy fast-food restaurant.