How to Form a Food Truck LLC

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.