Should I Start an LLC for My Pizza-by-the-Slice Restaurant?

Starting a limited liability company (LLC) for your pizza by the slice 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 pizza by the slice restaurant, lawsuits can arise from things like property damage or personal injury suffered on your business’s premises.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your pizza by the slice restaurant seem more credible.

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

A slice of pizza being pulled from the full pizza

Do I Need an LLC for a Pizza-by-the-Slice 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 Pizza-by-the-Slice Restaurant

By starting an LLC for your pizza-by-the-slice 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.

Pizza-by-the-slice restaurants will benefit from liability protection because of the risk of customer injuries, workplace accidents, and trademark infringement claims.

Example 1: A customer becomes ill after consuming a slice of pizza and sues the business for medical expenses and damages. If found liable, limited liability protection would ensure that the owner's personal assets are protected from any fees associated with the lawsuit.

Example 2: A server damages a customer's bag after dropping food on it. Following this, the customer sues the business for damages. If found liable, limited liability protection will ensure that the owner’s personal assets remain safeguarded from the lawsuit.

Example 3: A customer slips and falls on a puddle of water while visiting your restaurant. The fall causes the customer to sustain serious injury. Noting the lack of a wet floor sign, the customer sues the business. Regardless of the court’s ruling, only the business’s assets will be affected by the lawsuit and not the owner’s personal assets.

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 Pizza-by-the-Slice 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 pizza-by-the-slice 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

Pizza-by-the-slice 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.

For a pizza-by-the-slice restaurant, insurance can help to protect against risks such as loss or damage to inventory, liability for foodborne illness or accidents that may occur on the property, and injuries to employees or customers.

Common Situations Business Insurance May Cover for a Pizza-by-the-Slice Restaurant

Example 1: While entering your restroom, a customer slips on some wet flooring, injures herself in the resulting fall, and decides to sue your restaurant for damages because you didn’t mark the wet area. General liability insurance would pay for your legal defense and any required settlement.

Example 2: Another local pizzeria sues you for slander and libel. While you disagree with both claims, you know you need an attorney to defend your business. General liability insurance would cover your legal defense costs.

Example 3: As an employee brings supplies into your restaurant, he accidentally runs into a customer. The customer falls backward, sustains a concussion, and demands you pay for his medical treatment. General liability insurance would cover his medical expenses.

Other Types of Coverage Pizza-by-the-Slice 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 pizza-by-the-slice restaurants should obtain:

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time workers. 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.

Product Liability Insurance

While you strive to ensure your pizza puts a smile on every customer’s face, there’s always a chance someone might decide your product caused them harm. In the event of a lawsuit, product liability insurance would cover your legal fees and any required settlement.

Liquor Liability Insurance

If you sell alcoholic beverages at your restaurant, you need liquor liability insurance to protect you from lawsuits related to your customers’ consumption of the alcohol you sell them. If a customer sustains an injury and decides to sue your business, this coverage would pay for your legal defense and any required settlement.

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 property insurance.

Read our Business Insurance for Pizza-by-the-Slice Restaurants article for more info.

To open a pizza-by-the-slice restaurant, you will need to consider costs such as rent or mortgage payments, equipment, ingredients, staff salaries, administrative supplies, and insurance. These costs can vary greatly depending on the location of the business, but a smaller venture may cost around $10,000 or less.

Visit our How to Start a Pizza-by-the-Slice Restaurant guide to learn more about the costs of starting and maintaining this business.

The main ongoing expenses you’ll incur are the cost of ingredients, rent, equipment maintenance, insurance, and staff salaries.

Learn more about running a pizza-by-the-slice restaurant.

Profit is generated through the sale of individual slices of pizza to restaurant customers.

Learn more about starting a pizza-by-the-slice restaurant.

As the name suggests, pizza-by-the-slice restaurants offers slices of pizza to customers. Sometimes restaurants will make pizza slices their single product offerings, while others will make it a primary part of their menu.

The average pizza-by-the-slice restaurant will earn as much as $150,000 in profit in a year.

Learn more about starting a pizza-by-the-slice restaurant.