How to Form an LLC for your Food Truck
Food? Check. Truck? Check.
Now you’re ready to make your business official. One of the steps in this journey is starting an LLC for your mobile eatery, the good news is it’s not as difficult as you might think.
Why have an LLC for my Food Truck?
For Food Trucks, LLC’s provide a formal business structure that permits specific ownership levels and responsibilities for the owner(s), as well as the owner(s) to take advantage of the many important benefits that LLC’s offer.
When LLC’s conduct business, it’s very clear what assets are owned and managed by a LLC, which greatly simplifies an owner’s ability to sell the business at a later date if needed.
Benefits of an LLC for a Food Truck
A Limited Liability Company can protect the members or owners from personal liabilities resulting from business activities. If the business harms someone or violates some ordinance or statute, it is the LLC and not the owners, who bear responsibility.
As your business grows, doing business as a LLC adds a level of prestige to your business and gives your customers, vendors and partners the confidence that you know how to run and manage a business.
Of all the corporate entities, a LLC is perhaps the least costly to manage and maintain. Making fundamental changes to the management structure simply require a change to the Operating Agreement, versus any formal documentation submitted to the state. Most states do not require franchise fees, and most states do not require regular corporate reports, for LLC’s.
Once the LLC is formed, all you need is an operating agreement. The operating agreement dictates how the company is run, managed and how ownership is dealt with between the owners. It can be thought of as a “partnership agreement” between the members or owners.
LLC’s provide a great deal of flexibility in how they are taxed (i.e. they can be taxed as an S-Corporation or C-Corporation for multi-members), and therefore you can dictate different profit distributions, depending on the circumstances and what you want to accomplish.
LLC’s permit you to bring on partners at different, clearly defined levels. This means you can have “silent partners,” “minority owners,” “investors” and more, and clearly, indicate roles and responsibilities. It is relatively easy to admit or remove members, depending on the circumstances and the needs of your business.
LLC’s enable you to separate important assets or business functions, giving you the ability to vary or alter ownership among these assets or functions. You can also sell off or merge such assets or functions much more easily than if all your assets or business functions were in one large whole.
LLC’s can be “Member Managed” or “Manager Managed.” Member managed simply means the members all have certain rights and powers, and vote among themselves for important decisions (which can either be unanimous or by majority). Manager managed means the members vote to install a manager, who can either be an outside individual, company or another member, that runs the LLC on a day-to-day basis, making day-to-day decisions to run the LLC. Important decisions are still left to the members to vote among themselves (again, either by unanimous or majority vote).
A LLC will survive you, should you become deceased or incapacitated. A business entity, such as a LLC, is the ONLY way to cost-effectively ensure your business survives to the benefit of your family or estate.
A LLC provides tax advantages over a sole proprietorship or partnership, in that the IRS permits more deductions. For example, medical insurance expenses. Consult your tax advisor for more information about the tax advantages associated with a LLC.
Sole-member LLC’s are considered “disregarded entities” by the IRS, which means the profit, losses, and expenses flow through your individual Schedule C on the 1040. Multi-member LLC’s can be considered S-Corporations (the default), C-Corporations or partnerships, depending on what you tell the IRS.
What you need to start your Food Truck LLC
Starting a Food Truck LLC is easy with Law 4 Small Business. You just need two things to get started:
- A name for your LLC(Your Food Truck Name).
- A physical mailing address (not a P.O. box).
We have made it easy to get started. All you need to do is fill out our easy LLC Formation Questionnaire.
Important factors to consider
Even in a family run business it's important to have a good employment contract which lays out expectations. What do you do if your lazy brother calls in day, after day, after day? What do you do if Dad doesn't pay you your full share? Good examples of these agreements can include non-disclosure agreements, non-compete agreements, and independent contractor agreements.
Business Succession Planning
No one wants to think of the worst case scenario until it happens. But it helps to be prepared in case something is to happen to you or any of your business partner(s). Having a Business Succession Plan in place provides a concise and executable set of instructions that goes into effect when key players of a business become unable to fulfill their duties to the business.
A Registered Agent
A registered agent is required for any business that wants to incorporate or become a limited liability company. Your company will need a registered agent for each state where the company is registered and does business. You can designate yourself as a registered agent for your business, but you may only act as the registered agent for the state you reside and have a physical address in. For other states where your company exists, you must find a registered agent in that state.
A registered agent’s address is not the same as a companies address. Your business must also have its own address which can be a physical address, a P.O. box or, virtual mailbox.
When you register your Food Truck LLC with Law 4 Small Business, your first year of Registered Agent is FREE!
A Virtual Mailbox
With a potentially mobile business it may be difficult to have a physical address that isn't a P.O. Box. With a virtual mailbox, you can further preserve your personal privacy, use it as a business address, or use it to keep your mail orderly. It's like having a post office box without having to check on it yourself.
If you're ready to take the next step with your Food Truck, give us a call at 505.715.5700 or Contact Us today to set up a consultation.