Should I Start an LLC for My Frozen Yogurt Business?

Starting a limited liability company (LLC) for your frozen yogurt 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 frozen yogurt business, lawsuits can arise from things like a customer getting severely ill as a result of consuming contaminated frozen yogurt, landlord disputes, or workplace injuries.

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

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

Do I Need an LLC for a Frozen Yogurt 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 Frozen Yogurt Business

By starting an LLC for your frozen yogurt 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.

Frozen yogurt businesses will benefit from liability protection because of the risk of lawsuits for personal injuries, property damage, and libel.

Example 1: Your frozen yogurt business is sued by a supplier who alleges your refusal to accept a delivery is a fundamental breach of contract. You believe any delivery must follow an order. Nonetheless, if the supplier succeeds in court, he can only be compensated from business assets. Your personal assets would be safe from any judgment.

Example 2: You pay off a loan before time, and the lender charges an early payment fee, which you refuse to pay. He sues. If you lose in court, it is only your business assets that can be charged to pay the fees and any legal costs. Your personal assets would not be at risk.

Example 3: You want to close your frozen yogurt business to pursue other business opportunities, but hesitate because the business has negative equity. Even though your personal assets are enough to pay off the debts, the limited liability of your LLC would prevent creditors from legally compelling you to do so.

Example 4: A competing frozen yogurt location sues your business, claiming that your recent marketing campaign made false claims about them.

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 Frozen Yogurt 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 frozen yogurt 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

Frozen yogurt 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 dependable 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.

A frozen yogurt business should expect to face product liability claims. Such claims would be covered by general liability insurance, which also covers damage to property, legal fees, and costs to settle a lawsuit.

Common Situations Business Insurance May Cover for a Frozen Yogurt Business

Example 1: As a customer leaves your shop, she holds the door open for another customer, who then stops to check his phone in the doorway. The door swings shut as he's stopped, knocking him to the ground and causing him to break his wrist. He is angry and threatens to sue your shop for damages. General liability insurance would help cover his medical bills and potential legal fees you have.

Example 2: As your regular Monday delivery comes in, the overhead door on your loading dock malfunctions and severely damages the delivery van. The driver is unable to complete his orders for the day, and the inventory inside is ruined. Your general liability policy will likely cover the repairs to the delivery van and replace the damaged inventory.

Example 3: After cleaning up a yogurt spill in the lobby, a customer slips on the wet floor before an employee can set out a caution sign. They are badly injured and demand that you pay for their medical expenses. With general liability insurance, you can file a claim and likely have all of their medical costs covered.

Other Types of Coverage Frozen Yogurt 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 frozen yogurt businesses should obtain.

Product Liability Insurance

There is always a chance that a customer will claim that your product has caused them harm in some way. If this happens and they decide to pursue legal action, product liability insurance will pay for your legal fees and the cost of any settlement awarded in a lawsuit.

Workers’ Compensation Insurance

Workers’ compensation insurance will cover the cost of an employee’s medical bills if they are injured on the job as well as help cover lost wages if they are unable to work due to the injury. This coverage is legally required in most states for any company that has employees.

Data Breach Insurance

Many retail and food service businesses now offer loyalty programs to their customers. To do this, it’s often necessary to store sensitive personal and financial information on your business computers. But keeping this information on file can make your computer system vulnerable to cyberattacks. With data breach coverage, you can protect your business from possible lawsuits following a cyberattack.

Commercial Auto Insurance

If you deliver your frozen yogurt to any retail locations in your area, you should carry commercial auto insurance. In fact, you need this coverage even if you use your personal car for work duties. Your personal auto insurance won’t cover any accidents related to your job, so be sure to protect yourself and your employees with commercial auto insurance protection.

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 Frozen Yogurt Business Insurance article for more info.

Starting a frozen yogurt business by signing up for a franchise will cost around $375,000. Getting started on your own will be less, of course, depending on the scale and location of your business. Ongoing costs will include equipment supplies, wages, repairs, permits, and commercial insurance.

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

Recurring costs for frozen yogurt expenses can include employee wages, equipment repairs, supplies and ingredients, permit renewals, and lease payments.

Learn more about running a frozen yogurt business.

A frozen yogurt business sells frozen yogurt and other food items at a profit.

Learn more about starting a frozen yogurt business.

A frozen yogurt business offers a variety of frozen yogurt desserts and toppings to customers. Some frozen yogurt establishments offer less traditional options, such as shakes, smoothies, and cakes.

Profits depend on sales volume and overhead costs.

Learn more about starting a frozen yogurt business.