Why Should You Go with an LLC Operating Agreement for Your New Restaurant?

If you have a plan and the funds, investing in the café, club, bar or restaurant business here can turn out to be quite a profitable venture. Now, the question is, when you do decide to try your luck out in the restaurant business in Charleston, why should you go with a limited liability company (LLC) when you are choosing your business entity?

Personal Liability is Avoided with an LLC Operating Agreement

Personal liability in any business structure is a risky choice, but when you are serving food in your own establishment, it’s a metaphorical recipe for disaster!

Lawsuits on account of allergies and food poisonings are not uncommon incidents for restaurant owners to deal with, even if sometimes they are false claims, or the sickness was caused by something else that was not served at the sued establishment.

Whatever the truth may be, when you are the sole proprietor, you become personally liable for any case brought against your restaurant. It means that if the suing customer wins the case, you have to pay the awarded compensation settlement from your own pocket.

A limited liability company protects your personal bank balance and assets in such lawsuits because even if the suing customer wins, the only money at risk will be the amount you had put into the business and its assets. It’s not exactly an ideal scenario to lose your business or reputation, of course, but it’s a lot better than losing your house and car.

If you decide a limited liability company is the best framework for your business venture, it’s vital that you take professional advice from experts.

Tax Treatment Flexibility

Depending on your business and needs, you can choose to have your LLC taxed in different ways. However, it's important to talk to an accountant about this. One popular choice is to file paperwork that will have your LLC taxed as an S corporation. This allows you to choose to pay taxes on the total profit seen by the restaurant in the duration of a financial year, as opposed to taxes for your personal income from the restaurant.

How is an LLC Better than a Corporation Agreement?

Corporation agreements give business owners the same protection against personal liability as well, not to mention they come with their own set of advantages too. However, the LLC operating structure is more suited for small businesses due to its simplicity.

Limited liability company structures do not make it mandatory for the restaurant to have a board of directors for example, which would be quite redundant for a small establishment. The corporation agreement is more suited for big businesses with multiple assets, branches, shareholders, etc. rather than for small cafés, bars or restaurants.

By now, the advantages of choosing an LLC operating agreement should be clear, and unless you can find a reason as to why an LLC would not be suitable for your restaurant business, that is the best type of business structure to have in the food business.

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