Should I Start an LLC for My Tortilleria?

Starting a limited liability company (LLC) for your tortilleria 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 tortilleria, lawsuits can arise from things like FDA violations, employee injuries, and food-poisoning allegations.

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

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

Do I Need an LLC for a Tortilleria?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Tortilleria

By starting an LLC for your tortilleria, 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.

Tortillerias will benefit from liability protection because of the risk of being sued for personal injuries, libel, and product liability.

Example 1: When a customer’s child is diagnosed with a gastrointestinal illness, a lawsuit is filed against your tortilleria business, alleging that you do not operate in accordance with the safety and hygiene precautions of the FDA. Regardless of the validity of the lawsuit, your personal assets will remain protected from the claimant as a result of your limited liability in law.

Example 2: When one of your employees is seen spitting in a belligerent customer’s tortilla, the customer demands that you compensate him. You refuse, but let him know that you will be happy to offer him a different tortilla. As a result, the customer reports you to the FDA and files a lawsuit against your tortilleria, seeking compensation. Here, your limited liability protection will ensure that you will not be liable for personally compensating the claimant.

Example 3: You acquire a small business loan to cover your short-term expenses (e.g., materials, labor, rent, etc.). Since you didn’t personally guarantee the loan during its application, the lending party will not be able to sue you in order to recoup their investment if your LLC is unable to repay them in the future.

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 Tortilleria

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 tortilleria 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

Tortillerias 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.

Business insurance can protect your tortilleria business’s assets (e.g., equipment, storefront, delivery vehicles, etc.). It can also protect your own assets from negligent or tortious lawsuits that you are personally responsible for.

Note: If you hire employees, you will be legally required to purchase workers’ compensation insurance in the vast majority of states.

Common Situations Business Insurance May Cover for a Tortilleria

Example 1: As a display of customer appreciation, you throw an annual holiday party. The icy conditions cause one guest to slip and fall in the venue’s parking lot. They decide to sue both you and the venue owner for medical bill reimbursement. Your general liability insurance would help with legal expenses and any damages your business is ordered to pay by the court.

Example 2: As part of the lease agreement for your new workspace, you are required to show evidence of liability insurance for at least $1 million. Your general liability policy should help fulfill that obligation.

Example 3: During an interview for a local paper, you are critical of another tortilleria. They have named you in a lawsuit, citing defamation. Your general liability policy would cover your legal fees and court-awarded damages.

Example 4: A customer returns a package of tortillas, claiming they found a foreign object in the packaging. After naming your business in a lawsuit, your general liability insurance would cover your legal costs and any damages awarded by the court.

Other Types of Coverage Tortillerias 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 tortillerias should obtain:

Commercial Property Insurance

This policy covers business-owned real estate and business property in named perils, such as fire or natural disaster. A commercial property insurance policy can be tailored to meet your specific business insurance needs, whether you are a renter or building owner. Business owners are encouraged to carefully consider the replacement cost of all covered items before purchasing a policy.

Product Liability Insurance

Without product liability insurance, claims that arise from the manufacturing, distribution, and sale of your tortillas will not be covered. For example, if your tortillas make people sick, customers who claim negligence on your part, regardless of merit, can sue you in a court of law. This coverage provides legal representation and pays damages awarded by the court.

Workers’ Compensation Insurance

Most states mandate that all businesses with employees must carry workers’ compensation insurance. If a worker is injured or becomes ill while doing work-related activities, the policy would cover their medical bills and a percentage of wages lost while out of work. Additionally, it protects the employer against lawsuits, offering legal representation if an employee sues.

Commercial Umbrella Liability Insurance

As a business owner in the food industry, you are exposed to a number of liability risks out of your control. Your general liability policy is the first line of defense in a liability claim. Once the limits of that policy have been exhausted, you could be held responsible financially. With a commercial umbrella insurance policy in place, you have an added layer of protection, as this policy picks up where a general liability policy leaves off.

Commercial Auto Insurance

If your business model includes delivery, your personal auto policy will specifically exclude business-related accidents. To ensure there are no gaps in coverage, vehicles should be covered under a commercial auto insurance policy. The policy would cover the cost to repair your damaged vehicle, third-party liability claims, and lost equipment in the event of an accident. While the state mandates the minimum amount of coverage you must carry, entrepreneurs should consider protecting their assets by purchasing more than the minimum requirement.

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 if you have employees.

Read our Business Insurance article for more info.

The largest cost of starting a tortilleria is getting all the equipment you will need in order to make tortillas. For example, a commercial tortilla press can cost anywhere between $1,000 and $10,000. You will also need a corn grinder and dough mixer, acquire a commercial lease, and purchase all of the ingredients that you will need to make tortillas.

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

Rent, utilities, payroll, and ingredients are the primary ongoing costs for tortillerias.

Learn more about running a tortilleria.

A tortilleria makes money by selling tortillas.

Learn more about starting a tortilleria.

A tortilleria (sometimes known as a tortilla bakery) makes and sells tortillas. Most tortillerias specialize in flour or corn tortillas, while others have begun to make unique, non-traditional tortillas.

Profits can be substantial, especially if you secure at least one wholesale account.

Learn more about starting a tortilleria.