Should I Start an LLC for My Pet Bakery?

Starting a limited liability company (LLC) for your pet bakery 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 pet bakery, lawsuits can arise from things like a customer’s pet suffering an allergic reaction to one of your products due to misrepresentations made by your bakery about its ingredients.

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

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

Do I Need an LLC for a Pet Bakery?

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 Pet Bakery

By starting an LLC for your pet bakery, 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.

Pet bakeries will benefit from liability protection because of the risk of lawsuits for things like product liability, libel, and trademark infringement.

Example 1: A client purchases some items from your bakery for her cat after a consultation with you. Hours later, the cat has to be rushed to the veterinarian following a severe allergic reaction. She is distraught and decides to sue your business. With an LLC structure in place, your personal assets will remain safe from fines imposed by the court.

Example 2: A batch of materials is being delivered to your bakery. In the process of moving the boxes into your store, a revolving door hits one of the delivery men, and he is severely injured. He is treated for a broken bone but has to lose some work days in order to heal completely. If he goes on to sue, the lawsuit will only affect your business assets.

Example 3: You are hired to cater for a pet charity event. Due to the carelessness of one of your employees, a few dogs break loose while being fed and injure some of the elite guests. The resulting chaos leads to a lawsuit being filed against your business. If found liable to pay the injured party damages, this requirement will only be levied against your business’s assets.

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 Pet Bakery

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 pet bakery 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

Pet bakeries 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.

Pet bakeries need insurance because of the liability that comes with selling consumable products and any accompanying lawsuits. Allergic reactions, personal injury, and damaged properties, which can lead a client to take legal action against you, can then be covered under the purview of business insurance.

Common Situations Business Insurance May Cover for a Pet Bakery

Example 1: You’ve recently started putting out a water dish for visiting dogs to use while their owners are busy browsing your shelves. After a particularly messy dog uses the water dish, his owner slips and falls on the way out the door. He is seriously injured and upset that no caution sign was set up near the doggy dish. Your general liability policy will likely pay for their medical bills and any of your legal fees if there is a lawsuit.

Example 2: Your marketing team has come up with a great new commercial that is a hit with your customers. Unfortunately, one of your local competitors feels like you’ve libeled their company in the commercial and threatens legal action. Your general liability policy would likely pay for your legal fees and any damages awarded to the other company in a lawsuit.

Example 3: As your regular delivery driver goes back into your loading dock, your overhead door malfunctions and crushes the back-end of his van. Not only is the vehicle inoperable, but your merchandise is damaged as well. General liability insurance will likely pay for the vehicle repairs and cover your lost inventory as well.

Other Types of Coverage Pet Bakeries 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 pet bakeries should obtain:

Product Liability Insurance

If one of the products you make causes harm to a pet or their owners, you could be held legally responsible. Product liability insurance is designed to help protect your business in the event that you produce a defective or harmful product.

Workers’ Compensation Insurance

To protect your employees following a work-related accident or illness, workers’ compensation insurance can cover the cost of their medical bills, disability benefits, and, in extreme cases, death benefits as well. This insurance coverage is typically required by state law for any business with part-time and/or full-time employees.

Commercial Property Insurance

Creating your special pet food items requires a lot of equipment and inventory. If these items were damaged in a fire or other common accident, you could be left to pick up the pieces on your own without proper insurance protection. Commercial property insurance will cover the cost of repairing or replacing these items.

Commercial Umbrella Insurance

There is always the possibility that a lawsuit settlement or accident at your bakery could end up exhausting your primary policy limits. If this happens, you could be left to pay out-of-pocket for any leftover costs without proper backup. Commercial umbrella insurance works to cover expenses above and beyond your primary policy limits in these situations.

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, product liability insurance, and commercial property insurance.

Read our Pet Bakery Business Insurance article for more info.

Starting a pet bakery business can cost anywhere between $1,000 to $100,000. This depends on the approach you decide to take. You can choose to franchise, sell through a website and established retailers, or use your own kitchen as a processing facility. Costs like insurance, licensing fees, ingredient costs, packaging costs, as well as any employee salaries also need to be considered.

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

Annual licensing fees, ingredients and packaging, and payroll are the primary ongoing costs.

Learn more about running a pet bakery.

Pet bakeries charge for baked goods aimed at pets.

Learn more about starting a pet bakery.

Pet bakeries provide specially made baked treats that appeal to pets. A pet bakery’s profits depend on the size of its customer base and overhead costs.

Learn more about starting a pet bakery.