Should I Start an LLC for My Personal Chef Business?

Starting a limited liability company (LLC) for your personal chef 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 personal chef business, lawsuits can arise from things like negligently serving a client a meal that contains ingredients they’re allergic to or breaching any local food safety regulations.

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

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

Do I Need an LLC for a Personal Chef 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 Personal Chef Business

By starting an LLC for your personal chef 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.

Personal chef businesses will benefit from liability protection because food and beverage businesses, such as personal chef businesses, face a variety of risks associated with visiting and preparing food at client sites.

Example 1: While catering for a charity ball, two of your employees get into a physical altercation. This leads to the damage of some of your client's property. You sanction your employees, but the damaged items are hugely expensive, and a lawsuit is filed. In the ensuing litigation, limited liability protects your personal assets from the financial fallout of the lawsuit.

Example 2: A negligent employee failed to attend one of the briefing sessions leading up to a house party you are to cater for. She ends up preparing a dish with an ingredient the host is severely allergic to, and your client has to be hospitalized. Your business may be liable for compensation if she sues, but the limited liability will keep your personal assets safe from legal consequences.

Example 3: Your services are required in the delivery of 100 packed lunches to a children's picnic at exactly 2:00 p.m. At 2:30 p.m., you suddenly receive a call from your irate client stating that the lunches are still yet to be delivered. Following this, the customer sues the business. Regardless of the court’s ruling, your personal assets will remain safeguarded from any fees associated with the lawsuit.

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 Personal Chef 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 personal chef 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

Personal chef 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 the limited liability protection from an LLC protects your personal assets, not your business assets.

Personal chef businesses need insurance because of the liability that comes with selling consumable products. Allergic reactions, failed deliveries, and damaged properties, which can lead a client to take legal action against your business, can be covered by business insurance.

Common Situations Business Insurance May Cover for a Personal Chef Business

Example 1: While cooking a dish in your client’s kitchen, you accidentally run into a guest and knock her to the ground. She breaks an arm in the fall and demands your business pay for her medical treatment. General liability insurance would cover her medical expenses.

Example 2: As you bring groceries in from your car, you trip over a client’s cat and fall into a large television. General liability insurance would cover the cost of replacing your client’s damaged property.

Example 3: Another personal chef files a lawsuit against you for slander. While you disagree with the accusation, you know you need to hire a lawyer to protect your interests. General liability insurance would pay for your legal defense.

Other Types of Coverage Personal Chef 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 personal chef businesses should obtain:

Professional Liability Insurance

While you work hard to satisfy your clients, there’s always a chance someone might decide you made a mistake that caused them injury. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.

Product Liability Insurance

While you strive to produce quality products that your clients can enjoy, there’s always a chance someone might decide something you made caused them harm. In the event of a lawsuit, product liability insurance would cover your legal fees and any required settlement.

Commercial Auto Insurance

Any vehicle you use primarily for your personal chef 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 equipment or supplies you carry in your vehicle.

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 and professional liability insurance.

Read our Business Insurance for Personal Chefs article for more info.

You can choose to run your personal chef business from your home or rent a space. Regardless of either option, you'll need to factor in the cost of food, cooking supplies, utilities, and high-speed internet for recipe research purposes. Insurance, advertising, labor, and marketing should also be considered.

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

The main ongoing expenses include costs associated with ingredients, cooking supplies, a space for food preparation, utilities, insurance, advertising, and labor (if you have employees).

Learn more about running a personal chef business.

These businesses make money by charging clients fees for food preparation and other related services.

Learn more about starting a personal chef business.

Personal chefs prepare and cook a variety of dishes for individuals, businesses, and other organizations. Hired for special occasions as well as on an ongoing basis, personal chefs prepare some dishes in advance and others on the spot.

The average personal chef has the ability to earn as much as $40,000 in annual profits.

Learn more about running a personal chef business.