Starting a successful food truck business can be lucrative, but it can also be a risky and complicated path. When it comes to owning and operating any business (including a food truck), you will want to protect your assets from any potential liabilities.
That's where an LLC comes in.
Should I Get an LLC for My Food Truck?
We recommend getting an LLC for your food truck business for several reasons, including reducing liability and making staying in compliance a bit less complicated.
The amount of ongoing legal compliance you may need when owning and operating a food truck business lends itself to plenty of risks. In order to protect yourself, you'll need to separate your personal assets from your business assets. An LLC does just that — limits your liability and separates your assets in case any legal issues may arise.
In the food truck industry (and the food industry in general), there are plenty of risks you'll take every day. The chance of serving food that inadvertently makes someone sick is high, and many people turn to litigation when these problems arise. Forming an LLC to protect your personal assets is certainly worth it when compared to the amount of potential risk.
What Are the Other Business Entity Options for My Food Truck Business?
An LLC is just one business entity option you can choose from — but it's one of the most popular options when it comes to the food truck industry because of the structure and low costs associated with it.
However, you can also evaluate whether to incorporate your food truck company or operate as a sole proprietorship or partnership. That decision ultimately depends on your business goals, taxation, costs, and what your state legally requires of your food truck.
Benefits of LLCs for Food Trucks
Benefits of forming an LLC for your food truck business include personal liability protection, better tax rates than a sole proprietorship, additional tax options (such as an S Corp) to avoid double taxation, and increased credibility through becoming an official legal entity.
How to Form a Food Truck LLC
Besides crafting your menu, deciding on a fun brand name, and finding a truck, forming an LLC to protect everything you are building is crucial.
Decide how to file: do it yourself or hire an expert.
Obtain and file your Articles of Organization.
Create an operating agreement.
Get an EIN if you plan to hire employees or get a business loan.
Each state may also have its own requirements that you will need to comply with. After you form your LLC, you will need to acquire certain permits and licenses to operate in the city and state that your food truck business is serving. For example, you will need licensing from a local health department by passing a health inspection.
What Type of Ownership Is Best for a Food Truck?
The best type of ownership for a food truck is an LLC, as it provides the best liability protection and has a relatively easy setup process. But if you've read the above and still feel an LLC isn't right for you, other great ownership types include a sole proprietorship and a partnership.
Do Food Trucks Pay for Locations?
Yes, food trucks almost always have to pay for the location they set up in. The rate you'll pay will be dependent on a variety of factors, including the location, the time of day or night you set up, and how long you plan to stay. Make sure you check out the rates for multiple locations before you decide where to drive your truck so you get the best bang for your buck.
Bottom line: No matter what type of business you're starting, forming an LLC is a smart move. This is especially true for food trucks, as they are prone to litigation and other legal issues due to their mobility and the fact that they serve food. If you want to form an LLC for your business, Incfile can help.
Lisa Crocco is a marketer for an international food manufacturer by day and a freelance writer/marketer for startups and small businesses by night. She's written for outlets like USA Today College, Career Contessa, CloudPeeps and Fairygodboss.