Do I Need an LLC for My Ice Cream Truck Business?

Starting a limited liability company (LLC) for your ice cream truck 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 an ice cream truck business, lawsuits can arise from things like collisions between your ice cream truck and another road user as well as allergic reactions a customer may have to your ice cream.

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

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

Should I Start an LLC for an Ice Cream Truck 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 an Ice Cream Truck Business

By starting an LLC for your ice cream truck 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.

Ice cream truck businesses will benefit from liability protection because of the risk of product liability, trademark infringement, property damage, and workplace accidents.

Example 1: While backing your ice cream truck out of its space, you hit another food truck. The owner is attempting to sue you over the damage. Since your business is an LLC, limited liability would protect your assets from being taken in the settlement.

Example 2: A customer has an allergic reaction to what you serve them and they go to the hospital. They sue for medical expenses. Your personal assets could not be used to pay for this since they are protected with limited liability as an LLC.

Example 3: While driving to a site, your ice cream truck is in a collision with another vehicle. The other motorist sues to cover the damage to their vehicle. As an LLC, limited liability would keep your personal assets from being used to pay for the expenses.

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 an Ice Cream Truck 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 an ice cream truck 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

Ice cream truck 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?

All businesses need insurance to protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.

Since your business is mobile, insurance will be important for protecting your assets. If your truck is damaged due to severe weather or gets hit in an auto accident, insurance can help cover the cost of the repairs and get you back to work sooner.

Common Situations Business Insurance May Cover for an Ice Cream Truck Business

Example 1: As a supplier helps load products into your truck, they slip on the steps and sustain a concussion. General liability insurance would cover the supplier’s medical bills.

Example 2: A child climbs onto your parked truck at night, jumps off, and breaks an arm. General liability insurance typically covers such “common nuisance” situations and would pay for the child’s medical bills.

Example 3: A competitor believes one of your social media posts contains defamatory statements about their business and sues. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Other Types of Coverage Ice Cream Truck 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 ice cream truck businesses should obtain.

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 freezer breakdowns and cargo spoilage.

Product Liability Insurance

When you sell products to the public, there’s always a chance a customer may file a lawsuit if they believe one of your products caused harm — such as a child choking on an ice cream treat. Product liability insurance would protect your business by covering your legal fees and any damages awarded in a 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 benefits stemming from a work-related accident.

Commercial Umbrella Insurance

Accidentally hitting a child while driving your truck could lead to a very expensive lawsuit, so you may want to purchase additional liability coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed the limits of your general liability insurance 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 and commercial auto insurance.

Read our Business Insurance article for more info.

Your biggest expense will be the ice cream truck itself. This typically has a minimum cost of $10,000, but fancier models can run to twice that cost. The truck must be insured, which can cost between $1,500 to $8,000 every year. One of the attractive things about the business is that you can acquire your starting stock of ice cream for as little as $500 and simply order more as needed.

Visit our How to Start an Ice Cream Truck Business guide to learn more about the costs of starting and maintaining this business.

The main operating expenses for an ice cream truck are gas for the truck, insurance, and inventory.

Learn more about running an ice cream truck business.

An ice cream truck business makes money by selling ice cream and other treats to customers.

If your first truck is successful, you always have the option of adding more to your fleet. However, keep in mind that this could be a seasonal business, depending on the weather where you live.

Learn more about starting an ice cream truck business.

The profitability of an ice cream truck depends on many variables, but profits around $5,000 in a busy summer month are possible.

One advantage of an ice cream truck business is that it doesn’t require a storefront. This reduces startup and operating costs significantly, leaving more profit for you.

Learn more about starting an ice cream truck business.