Should I Start an LLC for My Cookie Dough Cafe?

Starting a limited liability company (LLC) for your cookie dough cafe 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 cookie dough cafe, lawsuits can arise from things like customers claiming that they got ill after consuming cookie dough in your cafe or one of your waitstaff accidentally getting injured while working.

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

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

Do I Need an LLC for a Cookie Dough Cafe?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Cookie Dough Cafe

By starting an LLC for your cookie dough cafe, 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.

Cookie dough cafes will benefit from liability protection because of the risk of lawsuits for personal injuries, property damage, or libel.

Example 1: When one of your customers claims they got ill after eating cookie dough in your cafe, they demand compensation. Since no proof has been brought forth showing that there’s a causative link between consuming your cookie dough and getting ill, you refuse to offer any sort of compensation. A few weeks later, you find out that they have filed a loss of income lawsuit against you. Regardless of the validity of the claim, your personal assets will remain protected if your business is registered as an LLC.

Example 2: Whilst waiting on a table, one of your waiters accidentally spills a tray full of drinks on a customer, who responds by attempting to help clean up the broken glass from the floor. When this leads to a cut, they ask you whether you can offer any sort of compensation, but you respond by stating that it was their decision to voluntarily help, so you don’t feel like you should have to compensate them. If a medical damages lawsuit arises, the limited liability offered by your LLC will ensure that you cannot be held personally liable for compensating the claiming party.

Example 3: You take on a small business loan to hire additional servers, as well as a head cookie dough chef. Since the loan agreement was drafted between your LLC and the lending party — and you did not personally guarantee the loan — the lender will not be able to sue you if your business is unable to pay them back in the future.

Example 4: A customer sues your business, claiming that your cookie dough gave them severe food poisoning.

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 Cookie Dough Cafe

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 cookie dough cafe 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

Cookie dough cafes 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 trusted 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?

Even though you will likely not “need” insurance unless you employ workers, it is a necessity if you want to protect your business’s assets (e.g., food supplies, storefront, cafe furniture, etc.). This is because an LLC’s limited liability protects the owners’ personal assets, not the business’s.

Moreover, limited liability does not protect the owners from negligent acts that they have personally committed.

Common Situations Business Insurance May Cover for a Cookie Dough Cafe

Example 1: During an event held at the cafe, there is an altercation between two customers. Personal property is damaged, and one person is sent to the hospital with an injury. Your general liability insurance should cover you if you are sued for medical costs and the replacement of damaged personal property.

Example 2: A customer drops a glass of water and fails to inform your staff of the broken glass. As a result, a customer cuts their foot and is unable to work for several weeks. A general liability policy would most likely compensate the customer for medical bills and lost wages.

Example 3: Your recently redesigned business cards catch the eye of a local business owner who claims similarities to their copyrighted logo. He is suing for copyright infringement, seeking damages in the amount of $10,000. A general liability policy should cover legal fees and any potential payout.

Other Types of Coverage Cookie Dough Cafes 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 cookie dough cafes should obtain:

Commercial Property Insurance

Commercial property insurance will pay to repair or replace owned real estate and other property, including equipment and supplies, that is damaged by covered events. You likely had extensive buildout costs and purchased specialized cooking equipment for your cookie dough cafe. To ensure proper coverage, you should carefully consider these costs when purchasing your policy.

This coverage is frequently available as part of a business owner’s policy.

Product liability insurance

Product liability insurance offers protection if a product you make and sell leads to illness or injury. These policies are tailored to the specifics of your business and the products you sell.

Workers’ Compensation Insurance

You are likely required by state law to ensure that each member of your workforce is financially protected should they sustain an injury or illness at work. Workers’ compensation insurance provides protection. While most states allow business owners to exempt themselves from coverage, those who work onsite regularly are urged to forego this exemption.

Workers’ compensation is typically purchased as a standalone policy.

Business Interruption Insurance

Most small businesses rely on regular business income to keep the doors open and employees paid. Being out of work for an extended period of time forces many to close their doors forever. If an event like a fire or other disaster keeps you from being able to open for a period of time, business interruption insurance can help make up some of your lost revenue.

Business interruption insurance should be available as part of a business owner’s policy.

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 Business Insurance article for more info.

If you want to start a cookie dough cafe from your home, you will be able to do this with a very small budget (i.e., around $500). If you are leasing a storefront and hiring staff, you will also need to factor in the cost of utilities and labor in your business plan.

Visit our How to Start a Cookie Dough Cafe guide to learn more about the costs of starting and maintaining this business.

Liability insurance, licensing and permitting fees, supplies, and employee salaries represent the main ongoing expenses for a cookie dough cafe.

Learn more about running a cookie dough cafe.

A cookie dough cafe charges customers for edible cookie dough.

Learn more about starting a cookie dough cafe.

A cookie dough cafe serves cookie dough that usually doesn’t contain raw eggs or other ingredients that could make customers sick. Similar to an ice cream store, this type of cafe often serves its product in cones or cartons.

A highly profitable cookie dough cafe can generate a profit margin of more than 10%.

Learn more about starting a cookie dough cafe.