Should I Start an LLC for My Italian Ice Business?

Starting a limited liability company (LLC) for your Italian ice business 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 Italian ice business, lawsuits can arise from things like customers claiming that your Italian ice was inaccurately labeled (e.g., the packaging failed to disclose allergens, etc.).

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

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

Do I Need an LLC for an Italian Ice Business?

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 Italian Ice Business

By starting an LLC for your Italian ice business, 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.

Italian ice businesses will benefit from liability protection because of the risk of lawsuits related to personal injuries, libel, and trademark infringement, among other things.

Example 1: Your Italian ice company is sued by a vendor who alleges the raw materials you returned to them had met specifications. You disagree, and he sues. In the event that he succeeds, your personal assets will not be subject to the judgment.

Example 2: Your Italian ice company is unable to repay a credit facility at the present time. The bank sues. Should it win its case, it can only be reimbursed from business assets. Your personal assets are safe from the court's decision.

Example 3: Buried by debt, you decide to shut down your Italian ice business. Your LLC has negative capital; liabilities exceed assets. Even though the business assets are not enough to pay the creditors in full, they cannot pursue your personal assets, which are protected by the limited liability shield of the LLC.

Example 4: A customer sues your business after they experience a severe allergic reaction from a flavor of your Italian ice, claiming that you did not provide a comprehensive ingredient list.

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 Italian Ice Business

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 Italian ice business 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

Italian ice businesses 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 the limited liability protection from an LLC protects your personal assets, not your business assets.

Italian ice companies should carry liability insurance to cover damage to their equipment, as well as personal injury claims relating to contaminated food. There is also liability insurance that covers damage to buildings, and many other ancillary costs.

Common Situations Business Insurance May Cover for a Italian Ice Company

Example 1: When you seek additional capital to franchise your business, your bank requires evidence of liability insurance as part of the loan terms. A general liability policy would fulfill this requirement.

Example 2: While delivering Italian ice to a birthday party, an employee backs into the customer’s air conditioning system and causes irreparable damage. General liability insurance would cover the cost of replacing the system and any other damage stemming from the incident.

Example 3: Your cleaning crew used the wrong solution on your floors, creating a slippery surface on which a customer falls and breaks a wrist. General liability insurance would cover her medical expenses and, in the event of a lawsuit, your legal fees and any court-awarded damages.

Other Types of Coverage Italian Ice Businesses 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 Italian ice companies should obtain.

Commercial Auto Insurance

Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the company truck, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Italian ice companies invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all of your equipment in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your Italian ice company may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your Italian ice company has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 Italian Ice Business Insurance article for more info.

Startup costs for an Italian ice company can be as little as $1,000, if a cart will be used. Opening a brick-and-mortar store will cost a great deal more. Ongoing costs will include licenses and permits, rent, salaries and commercial insurance.

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

Rent, supplies, festival fees, and labor costs represent the primary ongoing expenses.

Learn more about running an Italian ice business.

An Italian ice business sells scoops of Italian ice at a profit.

Learn more about starting an Italian ice business.

Italian ice, sometimes called water ice, is a type of frozen dessert. Italian ice businesses typically sell their products from kiosks, mobile carts, and brick-and-mortar stores.

Italian ice businesses have the potential to generate a considerable profit per scoop sold, but total profits will depend on sales volume and overhead costs.

Learn more about starting an Italian ice business.