Should I Start an LLC for My Fish Farm?

Starting a limited liability company (LLC) for your fish farm 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 fish farm, lawsuits can arise from things like animal abuse allegations, false advertisement claims, and food poisoning disputes as a result of eating your fish.

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

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

Do I Need an LLC for a Fish Farm?

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

You should start 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 Fish Farm

By starting an LLC for your fish farm, 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.

Fish farms will benefit from liability protection because of the risk of product liability, trademark infringement, and workplace accidents.

Example 1: A malfunctioning filtration system at your fish farm releases a toxic chemical into the surrounding water, causing major damage to local wildlife. To recoup these losses, environmental groups and government agencies may sue your business for damages. Limited liability protection will ensure that you are not personally liable for any of these expenses.

Example 2: A pipe at your fish farm breaks, releasing millions of gallons of waste into a nearby lake. This causes extensive damage to local ecosystems and infrastructure, resulting in expensive repairs. Limited liability protection can help you avoid paying for these costs out of your own pocket by ensuring that only your business assets are liable.

Example 3: A data breach at your fish farm results in the theft of thousands of customer records. Customers may sue your business to recover damages from the loss of sensitive data such as personal financial information and health records. Limited liability protection can help shield your personal assets in the event that these customers take legal action against your business.

Example 4: A restaurant sues your business, claiming that fish they bought from your farm were improperly raised and made a number of their customers sick.

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 Fish Farm

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 fish farm 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

Fish farms 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 dependable 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?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Fish farms require insurance to protect their business assets. Fish farms face many risks, from disease outbreaks to natural disasters that can damage the farm's infrastructure and harm fish populations. Insurance can provide financial assistance when these disasters occur, allowing fish farmers to rebuild quickly and continue operations as usual.

Common Situations Business Insurance May Cover for a Fish Farm

Example 1: While leading an elementary school field trip to your fish farm, a teacher trips over a display in your lobby, breaks an arm in the resulting fall, and needs emergency medical care. He asks your business to pay for the treatment. General liability insurance would cover his medical bills.

Example 2: A local competitor files a lawsuit against your business, claiming your new logo infringes on his copyright. General liability insurance would pay for your legal fees to defend your business and any required settlement.

Example 3: As an employee unloads a shipment of feed in the parking lot, he loses control of the dolly, and it hits a customer’s car. The customer decides to sue your business for damages. General liability insurance would cover your legal defense, the customer’s vehicle repair costs, and any other damages awarded in the lawsuit.

Other Types of Coverage Fish Farms 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 fish farms should obtain:

Product Liability Insurance

While your team works hard to supply a superior product, there’s always a chance one of your customers might claim your product caused them harm. In the event of a lawsuit, product liability insurance would cover your legal fees and any awarded damages.

Commercial Property Insurance

You made a major investment to establish your fish farm. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building(s) and grounds as well as the specialized equipment and inventory you store there.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary 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 Fish Farm Business Insurance article for more info.

The cost of opening a fish farm will depend on the size and scope of your operation and the type of farm you plan on starting, aquarium-based or commercial. You will need to buy equipment, fish food, and other accessories needed to get the business up and running.

Visit our How to Start a Fish Farm guide to learn more about the costs of starting and maintaining this business.

Some of the main operating expenses for a fish farm are fish eggs and/or fingerlings (juvenile fish), fish food, pump and plumbing maintenance, utilities, payroll, and new ponds or tanks.

Learn more about running a fish farm.

Fish farms make money by raising and selling fish to customers. Some fish farms also charge customers to catch their own fish.

Learn more about starting a fish farm.

Fish farms can raise fish for food, sport, or even pets. A fish farm can be a large operation in open water, a small tank-based farm, or something in between.

The average profit margin for a fish farm varies depending on its size and the type of fish it sells, but a large, successful farm could potentially earn more than $100,000 each year.

Learn more about starting a fish farm.