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How To Start An LLC For Bakery Businesses
Bakeries are gaining more and more popularity in the US as people try their hand at the craft. If you’re a baker seeking to turn your passion into a profitable venture, establishing a proper baking business, specifically an LLC, will help you do so. That is why it is important to conduct research on LLCs, their advantages, and why a baking business would need one.
Although it may seem difficult, setting up a baking LLC is easy. Here is all that you need to know about the topic.
Definition
What Is An LLC?
First things first: let’s talk about what a Limited Liability Corporation (LLC) is. An LLC is like a shield that safeguards your personal assets from any potential liabilities, legal battles, or financial obligations. You get to enjoy a more streamlined and flexible management structure as well. You can ever partner with a friend, share the sweetness of success, or expand your team when the time is right.
Advantages
What Are The Advantages Of A Bakery LLC?
Forming a bakery LLC has numerous advantages that can give you a solid foundation for your business. Below are some of them:
Safeguarded assets
The primary benefit of establishing an LLC is the ability for business owners to separate their personal assets from their business assets. This means that if you ever have a customer who decides to push charges, only your business will be affected.
Taxes and incentive programs
Several states offer tax benefits and other incentives to LLCs, which can help you save a lot as a business. For instance, LLCs have a tax option for you to avoid state taxes. To discover the programs you qualify for in your state, check with your local government authorities.
Professionalism
Establishing an LLC not only bolsters the credibility of your baking business but also instills confidence and trust in potential customers. You can get a business name registered and issue official receipts.
Once you establish your bakery LLC, you can use Google Business Profile to boost your online presence. Through customer reviews and other features, you can attract local customers and promote your location.
Easier loans
Setting up a baking business is not cheap, but owning a bakery LLC will allow you to borrow money with little fuss. Once you register, you can create a business bank account and get faster loan approval. Other business structures common with baking businesses, like a sole proprietorship, must pass other documents before being eligible for loans.
Disadvantages
What Are The Disadvantages Of A Bakery LLC?
Bakery LLC owners do have a couple of challenges to face. Below are some that you need to be aware of:
Official paperwork
As a registered business, you need to file paperwork IRS for compliance. It may be tricky for new owners, but we at StartGlobal can help you get started.
One type of business
Expanding your business by opening a second bakery is permissible under the same LLC. But if you’re branching out to other services not related to baking, you cannot do so under your current one.
The advantages of forming an LLC far outweigh its disadvantages. In fact, the most difficult challenges you will be facing will be ones involve the bakery itself, like leasing and searching for suppliers. Setting up an LLC is the smartest option for you, both as a bakery owner and a new business owner.
LLC Formation
How To Form A Bakery LLC
Although forming an LLC might seem overwhelming, the process itself is not as complicated. By breaking down the process into manageable steps, you can navigate the process with confidence and ease.
- Choose a location
- Decide on a name
- Appoint a Registered Agent
- File an Article Of Organization
- Draft An Operating Agreement
- Obtain your EIN and permits
- Get all the necessary permits
Choose a location
The first step of forming your bakery LLC is to decide which state you wish to set it up in. Although some states offer the freedom to operate your LLC out of it, we highly recommend that new business owners form their LLCs in their home state to reduce paperwork. If you ever decide to set up a bakery in another state, check for local requirements.
Decide on a name
Then, decide on a name not taken by any other registered business in your state. Some states require owners to show their business is an LLC in name, such as “Glen’s Bakery LLC,” so be sure to check with yours.
Appoint a Registered Agent
Simultaneously, you must work with a registered agent service, a business entity, or an individual with a permanent address in the registration state. The registered agent receives all important legal documents and correspondence on behalf of the LLC.
File an Article Of Organization
The next step is filing for the Articles or Certificate of Organization with the Secretary of State using your personal and business information. The fee for this step varies depending on the state and can be more expensive in others.
Draft an Operating Agreement
After the above process is complete, you can draft your operating agreement. This is a legal document that outlines the rules and guidelines for operating an LLC. It specifies how the company will be managed, the responsibilities of its owners, and the distribution of profits and losses. It helps prevent conflict, especially if you are working with a baking partner.
Get all the necessary permits
From here, all that remains is obtaining state-required licenses, permits, and your Employer Identification Number (EIN). Check your local government office for specific requirements, as they can vary from state to state.
These can be completed online, by mail, or by submitting the documents to the Secretary’s Office in person. Still, we highly advise that you get professional help to address any inquiries and prevent costly document errors.
LLC Taxes
How Are Bakery LLCs Taxed?
The amounts you must pay to the state in taxes, state fees, and annual report fees vary from state to state. In some, you can even have the annual fee waived. To avoid any unwanted financial surprises in the future though, conduct thorough research about these details beforehand to know what you will be spending for your bakery business.
LLCs also enjoy a lot of flexibility during their formation. You even have the freedom to choose how your LLC will be taxed.
Single owner
You can be taxed as a sole proprietor, which only involves reporting your LLC’s earnings as your personal income.
Multiple members
The business is taxed like a partnership, with all owners sharing tax responsibility. Each owner files taxes individually.
There is also the option to tax your business like a corporation, with all the benefits of being one. This grants you all the benefits and tax structures of a corporation. Corporation LLCs can sell company stocks and open their business for investment. However, they are subject to double taxation. They must also submit additional documents and comply with specific IRS regulations.
Costs
What Are The Costs Of Starting A Beauty LLC?
The filing costs for setting up an bakery LLC can vary depending on your local state laws. Generally, these costs range from approximately $50 to $500. Additionally, obtaining a business license typically costs around $50 to $100. It’s important to consider these expenses as part of your budget when starting your LLC.
LLC Costs
State filing fee
$50+
Registered agent service
$100+
LLC formation service
$50+
Operating agreement
$200+
Business license and permits
$50+
Employer Identification Number (EIN)
Varies
Initial legal and accounting fees
$200+
Insurance (annual)
$500+
Equipment and supplies
$3000+
Marketing and advertising
$500+
From potential injuries caused by kitchen equipment to legal disputes related to food safety and health code compliance, a baking LLC safeguards you from various risks and liabilities associated with the practice. If baking goods are your passion and you wish to make a living out of them, setting up a bakery LLC is the right choice. We at StartGlobal can help you get started.
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.