Should I Start an LLC for My Ice Cream Parlor?

Starting a limited liability company (LLC) for your ice cream parlor 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 an ice cream parlor, lawsuits can arise from things like accidentally serving ice cream containing peanuts to a customer with an allergy or burns suffered by a customer who consumed hot fudge.

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

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

Do I Need an LLC for an Ice Cream Parlor?

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 an Ice Cream Parlor

By starting an LLC for your ice cream parlor, 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.

Ice cream parlors will benefit from liability protection because food and beverage businesses, including ice cream parlors, face the risk of guest and employee safety while they are on the parlor premises.

Example 1: A scoop used for peanut products is accidentally used to scoop ice cream for an allergic customer. They sue your business for the resulting medical expenses. Since your business is an LLC, limited liability protects your personal assets so they will not be taken in the settlement.

Example 2: While visiting your parlor, a child trips over some furniture and fractures their arm. Their parents ask for your business to pay for the medical expenses. While your business may have to pay for this, as an LLC, your personal assets are protected with limited liability.

Example 3: A competitor believes that your most recent advertisement was libelous, leading to a lack of customers. They intend to sue you over this. Should you be found to be in the wrong, your personal assets cannot be taken in the settlement as they are protected with limited liability as an LLC.

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 an Ice Cream Parlor

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 an ice cream parlor 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

Ice cream parlors 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 professional 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Common Situations Business Insurance May Cover for an Ice Cream Parlor

Example 1: A customer injures herself when she slips on a wet bathroom floor. General liability insurance should cover the cost of her medical expenses. If she sues the company over the loss, the insurance would pay your legal expenses and damages awarded by the court.

Example 2: While taking the trash to the dumpster, your employee loses control of the handcart and it runs into a patron’s vehicle. General liability insurance should cover the cost to repair their vehicle.

Example 3: You are thinking of expanding to a new location but require extra capital. The bank requires evidence of $1 million in liability insurance as part of the loan terms. A general liability policy will cover these terms.

Other Types of Coverage Ice Cream Parlors 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 ice cream parlors should obtain.

Commercial Property Insurance

This type of business requires special equipment and a workspace tailored to its specific operating needs. If the building and its contents suffer damages from a covered loss, commercial property insurance would pay to repair or replace damaged items. Whether you own or rent, you can tailor this policy to meet the needs of your business.

You can purchase commercial property insurance as part of a business owner’s policy (BOP). Entrepreneurs should discuss policy terms to ensure a policy covers losses at replacement cost and that there is no gap in coverage.

Product Liability Insurance

Product liability insurance is critical for every business owner that manufactures, supplies, or sells products. If a customer claims illness or injury due to a product purchased from your business, they could sue you for damages. This policy would cover awarded damages and associated legal fees.

Since you can tailor product liability policies to the specific needs of the business, it’s important to have a candid conversation with your insurance agent before purchasing this policy. This coverage is generally sold as part of a BOP.

Workers' Compensation Insurance

State law requires business owners to carry workers' compensation on each of their employees. This coverage offers reimbursement for medical bills and a part of the employee’s wages while they recover from their injury or illness. If they decide to sue for additional damages, the policy would also offer legal representation and pay damages awarded to the claimant.

Workers' compensation is generally purchased as a standalone policy.

Commercial Auto Insurance

An ice cream parlor may need vehicles to transport its products or supplies. If you or a team member get in an auto accident conducting business-related activities, commercial auto insurance can pay for the repairs to damaged vehicles, as well as medical expenses, liability claims, and lost equipment. To protect your ice cream parlor from suffering a financial loss due to this claim, business owners should consider purchasing limits higher than the state-mandated minimum requirement.

You can purchase commercial auto insurance as a standalone policy or as part of a BOP, depending upon the carrier.

Business Interruption Insurance

Business interruption insurance provides fixed expenses and loss of income if a business shuts down due to a covered loss. Some policies also offer extra expense coverage, which sets the business up at a temporary location during building repairs.

Also known as business income insurance, this insurance is generally offered as part of a BOP package.

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 and commercial property insurance.

Read our Business Insurance article for more info.

Shop owners report an initial investment of $25,000, with many spending upwards of $50,000. Equipment is quite expensive with used pieces costing over $8,000.

Inventory costs vary depending upon the products you offer, typically averaging $5,000-$6,000 per month.

Ideally, you want a storefront that sees a lot of foot traffic and isn’t overrun with similar businesses. Rent can run anywhere from $1,800 to $3,000 per month.

Visit our How to Start an Ice Cream Parlor guide to learn more about the costs of starting and maintaining this business.

Ongoing costs you’ll want to consider will include inventory costs, advertising, labor costs, as well as energy bills.

Learn more about running an ice cream parlor.

Most ice cream parlors will charge their customers varying rates depending on the number of scoops they’re looking to purchase.

Learn more about starting an ice cream parlor.

As a popular dessert option, ice cream parlors provide a popular and profitable service to many audiences. A successful ice cream parlor could stand to profit more than $49,000 a year.

Learn more about starting an ice cream parlor.