Should I Start an LLC for My Smoothie Business?

Starting a limited liability company (LLC) for your smoothie 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 a smoothie business, lawsuits can arise from things like employee complaints, product liability, health and safety regulations, or trademark infringement.

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

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

Do I Need an LLC for a Smoothie 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 a Smoothie Business

By starting an LLC for your smoothie 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.

Smoothie businesses will benefit from liability protection because food and beverage businesses, including smoothie businesses, face the risk of product liability, trademark infringement, workplace accidents, and financial data breaches.

Example 1: A customer takes his family out on a smoothie date. As they taste your smoothie, they complain of an awkward taste as though the fruits are unfresh. Everyone gets sick and their youngest child is hospitalized. If they sue, your business assets may be affected, but your personal assets will be shielded by the LLC.

Example 2: It is a new year celebration, and many happy customers line up at your smoothie booth. While your employee hurries to serve them, she leaves a tripping hazard near the line. A customer trips, falls and gets badly injured. He sues for medical expenses, lost wages, and pain and suffering. With an LLC, your business will be liable, but your personal assets will be shielded.

Example 3: A customer comes to your store to enjoy a cold smoothie on a hot afternoon. As he stretches his hand to grab the drink over the low counter, a faulty connection close to the blender shocks him badly. If you are found negligent, your business may be affected, but you will not be held personally liable.

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 Smoothie 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 a smoothie 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

Smoothie 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.

Smoothie businesses need insurance to cover supplies theft, equipment damage, employee injury, customer lawsuits, and other situations that may result in bankruptcy.

Common Situations Business Insurance May Cover for a Smoothie Business

Example 1: An employee spills a smoothie on the floor in front of the counter and quickly mops up the mess. He forgets to leave a notice that the floor is slippery due to mopping, and an elderly customer slips on the wet floor. The customer’s ankle is broken, and your company is found liable. General liability insurance could likely help in covering payments ordered by the court or any settlement reached regarding medical expenses.

Example 2: An employee is in a hurry, hauling a large box of newly arrived store equipment through the customer waiting area instead of the back door. He loses his grip, dropping the heavy box on a customer’s foot. The customer suffers a bone fracture and requires a cast and a wheelchair for several months. If found liable in court, your business would probably be covered by general liability insurance for the cost of a settlement or ongoing medical payments.

Example 3: An employee at one of your locations decides to begin making and selling an imitation smoothie sold by a competing smoothie store. She advertises this product on a chalkboard sign outside, and word gets around to the competing business. They sue your company for copyright infringement. Your business would likely obtain coverage from general liability insurance in the event of a settlement or a payment ordered by the court.

Other Types of Coverage Smoothie 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 smoothie stores should obtain:

Product Liability Insurance

This is a key policy for all businesses that sell food products. Between choking hazards, allergies, or other food-related damages, a company can find itself in hot water without a policy to cover serious product lawsuits. It is necessary to keep your smoothie business safe with a product liability policy in case a customer suffers unexpected health consequences that are linked to your beverages. This insurance covers a variety of damages caused by the products you sell, and it can be custom-tailored to your business for maximum effectiveness.

Commercial Property Insurance

A given smoothie store location will contain not only ingredients and supplies but also expensive machinery used in custom-crafting its advertised smoothie beverages. Commercial property insurance is essential for business owners looking to protect their inventory, equipment, and owned real estate investments from threats like fire and weather. Avoid costly replacement losses from unpredictable disasters with a commercial property policy.

Workers’ Compensation Insurance

Your business may begin as a smoothie stand, but if you make sound business choices, with a bit of luck, you can begin expanding. Expansions often include a need for employees who will be working under you. If you hire part-time or full-time workers to help run your business, you will be legally required to purchase workers’ compensation policies. This insurance keeps your employees covered in the event of on-site accidents and provides disability and death benefits for any damages that they may suffer while in the workplace.

Business Interruption Insurance

A successful business is an active business. But what happens when unexpected events cause your business to shut down temporarily? It can be disastrous for a business to go dormant, not only because of the loss of revenue during a shutdown but also the potential discouragement or confusion of customers who decide not to return. Business interruption insurance can provide coverage when your company's storefronts or other facilities need to undergo repairs, relocations, or even wait out nearby major construction that prohibits access to your location. Some causes of a temporary shutdown include fire, tornadoes, and similar destructive forces.

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 Smoothie Business Business Insurance article for more info.

Starting this business can cost between $10,000 to $650,000. You will use this money to cover the costs of equipment, licenses, store rent, hiring, advertising, and supplies. You will also need to budget for employees’ salaries, equipment repair, and permits.

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

Rent, payroll, inventory, and marketing are some of the main operating costs for a smoothie business.

Learn more about running a smoothie business.

Smoothie businesses make money by selling smoothies and possibly other food and beverages.

Learn more about starting a smoothie business.

A smoothie shop provides smoothies to customers. Some smoothie businesses focus on healthy options and may even include items like juices and frozen yogurts.

A smoothie business can operate out of an independent storefront or as a kiosk or counter in a mall or gym. The expected profit for a smoothie business can vary widely depending on its location, business model, and whether it’s a franchise or an independent establishment.

Learn more about starting a smoothie business.