Should I Start an LLC for My Sub Shop?

Starting a limited liability company (LLC) for your sub shop 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 sub shop, lawsuits can arise from things like misrepresenting the quality of the ingredients used in your sandwiches or food poisoning suffered by customers as a result of the use of out-of-date ingredients.

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

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

Do I Need an LLC for a Sub Shop?

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 Sub Shop

By starting an LLC for your sub shop, 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.

Sub shops will benefit from liability protection because of the risk of being sued for personal injuries, property damage, and trademark infringement.

Example 1: An employee at your sub shop often marketed that fresh ingredients were used in the sandwiches when in reality, frozen ingredients were used instead. This led one customer to file a lawsuit for fraud against your business. In this scenario, your personal assets cannot be seized by the court in order to satisfy any business obligations to pay the plaintiff damages.

Example 2: A customer suffered serious food poisoning after eating a sandwich from your sub shop made with out-of-date ingredients. As a result, the customer sued your business for this personal injury. Limited liability would prevent the court from being able to use your personal assets in order to meet any business liabilities.

Example 3: One of the managers at your sub shop made an agreement with a supplier to purchase a specific amount of ingredients at a set price. However, upon realizing that he had grossly overestimated the amounts your business would need, he decided not to pay for the extra quantities. This prompted the supplier to file a lawsuit against your business for breach of contract. In the ensuing lawsuit, any liability to pay damages can only be imposed on 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 Sub Shop

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 sub shop 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

Sub shops 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.

Insurance is particularly beneficial for sub shops due to the number of liabilities this type of business faces. For example, in the event that a customer was injured on your business premises, insurance would shield your business’s assets from any settlements that may result from a lawsuit.

Common Situations Business Insurance May Cover for a Sub Shop

Example 1: An employee is mopping the floor but forgets to place a “wet floor” sign over the area. An elderly customer slips and falls, breaking her tailbone. If you were found liable, general liability insurance would probably help cover some of the damages or any settlement reached between your business and the customer.

Example 2: Your employee permits a customer’s dog to enter the store, even though this is not allowed in restaurants. The dog escapes its owner and bites a small child, requiring medical care. If found liable, your business would probably be covered for some of the resulting damages or any settlement reached between you and the child’s guardians.

Example 3: A customer orders a sub without reading its description. He is allergic to one of the ingredients in the sandwich and has a severe reaction, cutting off his air supply due to rapid swelling. He survives but incurs substantial medical costs. If found liable, general liability insurance would likely cover some of what your business owes in damages or any settlement reached.

Other Types of Coverage Sub Shops 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 sub shops should obtain.

Commercial Property Insurance

From food ingredients to kitchenware, stoves, refrigerators, and more, a sub shop business has plenty to lose in the event of a catastrophe like fire or violent weather. Losses of equipment and inventory, or even the shop itself, could represent a serious setback for your business. Commercial property insurance provides coverage for losses of equipment, tools, inventory, and real estate in the event of the aforementioned disasters or other covered events.

Business Interruption Insurance

Together with commercial property insurance, this policy can make your business extremely resilient. Damages to commercial property from fires, tornadoes, and other destructive forces can leave your business out of commission for an unknown period of time.

Business interruption insurance exists to provide coverage for profit losses during this downtime. Sometimes, it even provides coverage for temporary relocation costs, allowing your business to get back on track while it reestablishes itself in the wake of a catastrophe.

Commercial Auto Insurance

Some sub shops don’t merely provide on-site services — they also deliver! If your business is joining the food delivery movement, it will need commercial automobiles. Commercial auto insurance keeps your company’s delivery vehicles covered for accidents that take place while your drivers are out on the road.

Workers’ Compensation Insurance

If your sub shop employs part-time or full-time workers, most states will legally require you to carry workers’ compensation insurance. This type of policy covers expenses related to injuries or illnesses that employees suffer while on the job. It can also help employees cover lost wages for a period of time in which they are unable to work due to their injury.

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 Business Insurance article for more info.

Sub shop owners should prepare to need a minimum of $60,000 in order to launch their businesses (though this could easily range up to hundreds of thousands of dollars). The greatest components of this figure will include leasing business property, promotional materials, potential remodeling, franchise costs, and acquiring equipment.

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

Inventory, payroll, rent, and marketing are the primary ongoing expenses of a sub shop.

Learn more about running a sub shop.

A sub shop sells submarine sandwiches, drinks, and sides.

Learn more about starting a sub shop.

A sub shop sells submarine sandwiches for lunch and dinner. They also sell drinks, side dishes, and desserts.

Profits depend primarily on customer volume and location.

Learn more about starting a sub shop.