To Form An Llc Or Not?

Business By salsaman42 Updated 4 Apr 2008 , 12:14am by pastrylady

salsaman42 Posted 29 Mar 2008 , 2:52pm
post #1 of 15

Hi all. I recently started a home bakery business, wedding cakes being my main interest. Went to a small business class at a local university last night. A lawyer was teaching the class about Limited Liability Corporations. He said the food industry ESPECIALLY needs to do this. It separates your business from your estate basically, so that if you make people sick from eating something you made, they can only sue the business and not take your home and other personal monies. After you get the LLC, then you have to get an EIN (employer identification number) then get a separate checking and or savings account in the business's name. It all makes sense, I guess. Then I talked to a lawyer friend who said in all his years being an atty. he has never seen a food related case in the court or even read about one. And if someone did try to sue you they would have a really hard time proving you were at fault. I'm in Ohio. Has anyone done all of these things, or been advised about it? I'd really like to hear some other opinions on this subject.
Thanks, Scott

14 replies
loriemoms Posted 31 Mar 2008 , 2:00pm
post #2 of 15

I spoke with my lawyer on this and he said an LLC does you no good if you are the one making the cakes, and doing the deliveries, etc.

This is because they can not only sue the business, but they can sue the person who made the cakes as well. (which is you) If you have someone else doing the cakes, then yes, get an LLC.

Also, it is VERY hard to proove food poisoning from cake. It is considered a low risk food, which very little baterial matter to make someone sick. If you are doing other types of food like coffee and cafe sandwiches, then yes, you can get sued.

If I were you, I would talk with your accountant and your personal lawyer (not someone who is just making a base statement) who knows your business and what you do, to decide if you need an LLC.

loriemoms Posted 31 Mar 2008 , 2:02pm
post #3 of 15

oh and PS YES, have ALL Your business stuff in its own account. This is for tax reasons and VERY important, especailly if you want to do any deductions.

MichelleM77 Posted 31 Mar 2008 , 4:05pm
post #4 of 15

I'm in Ohio and was planning on setting up as an LLC because we just bought a house. I thought an EIC was needed only if you had employees, but all the legal stuff gets lost in my brain, and I really need to find a lawyer to talk to on all of this.

Where in Ohio are you?

salsaman42 Posted 1 Apr 2008 , 10:07am
post #5 of 15

I'm in Canton (I sent you an email) I understand that you need an EIN if you are setting up a separate checking/savings account in the business name for the business...

loriemoms Posted 1 Apr 2008 , 11:33am
post #6 of 15

I guess it varies by state, but I had a long discussion with my accountant on this subject...an LLC isn't just you paying money and getting "protection" It also means filing taxes differently, and paying the IRS a LOT more money. (you have to start paying yourself a salery and all kinds of complicated things) I very much highly advise you to talk to your accountant and lawyer before doing anything, especially your first couple of years where you most likely will not be making any money.

MichelleM77 Posted 1 Apr 2008 , 11:59am
post #7 of 15

Thank you both for your information. There is so much to learn!

mom42ws Posted 2 Apr 2008 , 11:54am
post #8 of 15

oh man! i feel scared now because i thought i was going by the books so to speak and set up an LLC for my baking business because i thought it was the best way to protect myself. i don't get lots of orders but i was more trying to set things up for it (the bus.) picking up down the road. of course i didn't think to contact an attorney or accountant on it. hmmm.....

indydebi Posted 2 Apr 2008 , 12:27pm
post #9 of 15

I specifically asked my attorney about the "they can sue the company and the person personally" thing so what's the big advantage?. He said lawyers will advise the client to sue EVERYONE on the initial filiing, but as my attorney, he would get the lawsuit against me personally thrown out .... as long as I was an LLC and everything was being run as a proper business (keeping personal money and business money separate).

Erdica Posted 2 Apr 2008 , 12:54pm
post #10 of 15

I live in Ohio too. We are setting up an LLC after doing much research and talking to many accountants and lawyers. Just getting different opinions.

We are going to go with an LLC (just coming up with the money) mostly because our business is growing great. We need to separate things and get it all taken care of.

I would talk to both some lawyers and accountants to get some opinions about LLC. There is a LOT more paperwork involved when you change to LLC.

loriemoms Posted 2 Apr 2008 , 1:00pm
post #11 of 15
Quote:
Originally Posted by indydebi

I specifically asked my attorney about the "they can sue the company and the person personally" thing so what's the big advantage?. He said lawyers will advise the client to sue EVERYONE on the initial filiing, but as my attorney, he would get the lawsuit against me personally thrown out .... as long as I was an LLC and everything was being run as a proper business (keeping personal money and business money separate).




That is a very good point...My main concern wasnt so much someone getting sick but someone falling down the stairs or something when they picked up a cake and breaking thier leg/hip, etc. I have very expensive insurance for that. I also spoke at great length with my accountant on LLC and he told me he would let me know when I am ready for it. Because it is a TON more paper work, you have to pay more taxes, and it just puts you in a new catagory with the IRS. A lot of people think Oh I will just pay the 125 fee (or whatever it is in your area) Just be careful on these kinds of things.

Again, even if you arent an LLC, you should have EVERYTHING seperate from personal stuff. This is incase you get audited. I have more fears of the IRS, especaily being a home baker, then someone sueing me! icon_eek.gif

indydebi Posted 2 Apr 2008 , 1:09pm
post #12 of 15

a ton more taxes??? icon_confused.gif I haven't noticed any. icon_confused.gif

mkolmar Posted 2 Apr 2008 , 1:37pm
post #13 of 15

My DH has an LLC for his business and yes, it is more paper work but we have not noticed any difference in the taxes. I was planning on setting up as an LLC within probably the 2 months. Better safe than sorry.

adonisthegreek1 Posted 3 Apr 2008 , 5:16pm
post #14 of 15
Quote:
Originally Posted by loriemoms

...Also, it is VERY hard to proove food poisoning from cake. It is considered a low risk food, which very little baterial matter to make someone sick. If you are doing other types of food like coffee and cafe sandwiches, then yes, you can get sued. ...




I'd have to disagree with this. A few years ago there was a bakery near my friend in Michigan that had major lawsuits. About 200 people became ill. The health department tracked it to an outbreak of salmonella from improper sanitation.

Here's an excerpt:The county report says that of the 196 who got sick, 24 were hospitalized. Of 165 people tested, 99 were female and 160 experienced diarrhea, 141 abdominal pain, 96 nausea, 91 fever and 44 vomiting.

The filling was used in cannolis and cassatta cakes that were purchased by 39 separate groups or individuals, including 35 mini cassatta cakes for a bridal shower with 630 guests. Investigators determined that a small number of tiramisu cakes, which did not contain the cannoli filling, were contaminated likely due to cross contamination at a shared preparation table.

pastrylady Posted 4 Apr 2008 , 12:14am
post #15 of 15
Quote:
Originally Posted by indydebi

I specifically asked my attorney about the "they can sue the company and the person personally" thing so what's the big advantage?. He said lawyers will advise the client to sue EVERYONE on the initial filiing, but as my attorney, he would get the lawsuit against me personally thrown out .... as long as I was an LLC and everything was being run as a proper business (keeping personal money and business money separate).




I was told the same thing by my attorney. He said that any assets held in both my and my husband's name could not be touched by a lawsuit (the house being the big one). Since my husband is not listed as a member of the LLC, even if they sued me personally, they could only go after assets that are in my name only.

I was also told by my accountant to always keep business and personal money separate. He said if anyone ever came after me and they saw that all the money was mixed up, they could decide that it's all fair game.

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