Do I Need an LLC for My Pop-Up Restaurant Business?

Starting a limited liability company (LLC) for your pop-up restaurant 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 pop-up restaurant business, lawsuits can arise from things like forgetting customer instructions when preparing their food, which can lead some customers to suffer an allergic reaction.

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

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

Should I Start an LLC for My Pop-Up 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 Pop-Up Restaurant

By starting an LLC for your pop-up 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.

Pop-up restaurants will benefit from liability protection because of the relatively high risk involved with handling food, workplace accidents, and trademark infringement.

Example 1: One of your customers requests that you make one of the dishes allergen-free, which the server forgets to relay to the kitchen. As a result, the customer has a severe reaction to the dish and requires medical attention. If he sues, your business will be affected, but your personal assets will be safe.

Example 2: A customer comes to complain that she suffered food poisoning from eating your food. She claimed she had spent the week seeing a doctor and insisted you pay her medical bill. If she sues you for it, your business may pay compensation, but you will remain safe.

Example 3: While your new employee is cooking, she makes a mistake, and there is a fire outbreak. The fire causes damage to some parts of the restaurant before it is eventually put off. The property owner demands you fix his property, or he sues. If he sues you, your business may pay damages but not you as the owner.

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 Pop-Up 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 pop-up 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

pop-up restaurant 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.

Pop-up restaurant businesses need insurance for hazards such as fire outbreaks, employees' and customer's lawsuits, and damaged equipment and foodstuffs.

Common Situations Business Insurance May Cover for a Pop-Up Restaurant Business

Example 1: While setting up your pop-up restaurant, you fail to see a customer who arrives early, and you accidentally run into her. She breaks a wrist when she falls to the ground and demands your business pay for her medical treatment. General liability insurance would cover her medical expenses.

Example 2: A competitor sues your business for slander and libel. While you disagree with both claims, you know you need a lawyer right away. General liability insurance would cover your legal defense costs and any required settlement.

Example 3: When an employee spills grease outside your pop-up restaurant and fails to clean it up, a customer slips on the grease, breaks an arm, and decides to sue your business for damages. General liability insurance would pay for your legal defense and any required settlement.

Other Types of Coverage Pop-Up Restaurant 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 pop-up restaurant businesses should obtain:

Product Liability Insurance

While you’re passionate about the food you serve at your pop-up restaurant, 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.

Commercial Property Insurance

You made a major investment in the kitchen equipment, supplies, ingredients, and other property needed to run your pop-up 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.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for your 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.

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 Pop-Up Restaurants article for more info.

It is relatively inexpensive to start a pop-up restaurant because you can operate in any spot that’s safe to cook. However, you will need to purchase the food, purchase or hire equipment, and pay employees’ salaries. It’s not unusual to spend several thousand dollars or more when all is said and done.

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

The main ongoing expenses include employee wages, raw ingredients, and the cost to rent a space.

Learn more about running a pop-up restaurant.

These businesses make money by selling specialty dishes to customers at a profit.

Learn more about starting a pop-up restaurant.

Pop-up restaurants are small establishments that temporarily sell food and beverages in cities and popular locations.

Successful pop-up restaurants have the potential to generate as much as $7,500 in profits in a single night.

Learn more about starting a pop-up restaurant.