Is It Really All Necessary?

Business By JillK Updated 10 Jan 2009 , 12:23pm by littlecake

JillK Posted 8 Jan 2009 , 3:18pm
post #1 of 23

Many thanks to all those who replied to my plea for help with business incorporation terminology, etc. I'm still looking into a number of things and options as far as the scope of what I want to do, but I very much appreciate the help. icon_razz.gif I'll be speaking to a tax attorney at some point, rest assured.

I've been thinking, though ... until I hit the larger-scale, doing-this-full-time level (which I'd love to do eventually) .... is it really all necessary?

I'm getting legal kitchen-wise; that's not even a question. But to simply do a cake or two or a batch of cookies out of my kitchen for when a friend asks ... is it really necessary to go through all the incorporation stuff? Where is the line drawn?

Please forgive my ignorance, but I'm curious. What have you done?

22 replies
meancat Posted 8 Jan 2009 , 4:31pm
post #2 of 23

Yeah it really is, because lets just say that one of your "coworkers" gets super sick and lands in the hospital or something worse and they want to now take legal action against you. When you incorporate your business you are protecting yourself personally from being sued. They can only go after your business and not you. Its a cya thing even though its a pain. Plus it should be a Piece of mind type thing for you to know that you are legit in all aspects of owning a business.

itsacake Posted 8 Jan 2009 , 5:06pm
post #3 of 23

I am not an attorney, I'm a pastry chef, so take this with a grain of salt. I just recently filed all the papers to be an LLC mostly because I thought it would help if I got sued. Interestingly, in exchanging e-mails about something else with an attorney who specializes in corporate law, I happened to mention this and he sent me the following commment.

"The LLC is helpful if you have employees and they do something wrong that you can't be blamed for on a failure-to-supervise basis. Otherwise, if something does go wrong, you will be personally sued anyway. The LLC might discourage the unsophisticated plaintiff, but not one represented by a lawyer. So, you may be wasting $800 per year plus gross receipts tax plus the cost of extra tax returns."

Being an LLC is not the same as being incorporated, but it often is used in a similar way, so you may want to check with an attorney in your state. The info on here (including what I'm telling you) is well-meaning, but it isn't always correct.

itsacake Posted 8 Jan 2009 , 5:07pm
post #4 of 23

Sorry, duplicate post and there doesn't seem to be a way to delete it.

meancat Posted 8 Jan 2009 , 5:21pm
post #5 of 23

Here is a website that explains it :

meancat Posted 8 Jan 2009 , 5:27pm
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Wait - there's more!! This is my fav place to get forms that are legal and some advice on what to do... hope this is helping! Like I said before - llc offers personal liability protection...

FullHouse Posted 8 Jan 2009 , 6:01pm
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I only bake the occasional cake for friends/acquaintances and am incorporated. I probably would never have thought of it, but my father is an attorney and strongly advised me to let him incorporate me so only my company is liable, not me personally. He said, especially being a home baker, I needed this because otherwise my house could be in jepordary if someone sued me. If I am baking without being incorporated and someone sued me personally, then my personal assets are at risk (i.e., my house). Now each state has different laws and of course my advice is bsed on my understanding of how my dad explained it to me, so still check this all out with your attorney, but there's my 2 cents.

wendalynn11 Posted 8 Jan 2009 , 6:21pm
post #9 of 23

NCmomof3boys, have you gone the route of a legal kitchen also? I am also in NC and bake only occasionally for family and friends and never thought of becoming incorporated. I can't get my kitchen legal due to animals in the house. TIA!

JillK Posted 9 Jan 2009 , 4:05pm
post #10 of 23

Wow. icon_eek.gif See, this is why I love CC. Ask and ye shall receive. Thank you.

If I may wear out my welcome (hope not!) with another question, how much do y'all have to pay for incorporation? I wasn't too fazed by the one-time cost, but isn't there a yearly fee, etc.? I just can't see paying hundreds to do a handful of cakes and a few dozen cookies a year ....

Or perhaps I'm wrong. Please tell me I'm wrong! icon_razz.gif

Thanks to you all.

littlecake Posted 9 Jan 2009 , 5:56pm
post #11 of 23

i have a storefront, and was an "s" corp for a couple years...the paperwork made me want to kill....

anyhoo for the last 5 years i'm a sole prop. with no probs and a lot less headaches...simple as pie.

for someone to get seriously ill on cake, something had to go bad wrong....there's not much in cake to make you sick.

i know of several people who got food poisoning at different eating places...don't ya'll?...did they ever sue them?

it's working for me, but i like things simple.

IcedTea4Me2 Posted 9 Jan 2009 , 6:05pm
post #12 of 23

I know of several people who got food poisoning at different eating places...don't ya'll?...did they ever sue them?

I can't tell you if people in those cases sued or not, but I can tell you this. I am a court reporter and I have plenty of job security. People will sue for anything or nothing.

FullHouse Posted 9 Jan 2009 , 6:20pm
post #13 of 23

Wendalynn, I've pm'd you.

As far as yearly paperwork, I haven't gotten there yet so I can't help. I can say that you do have to worry about being sued with cake. What if you prepare in a kitchen where you've used nuts at some point and a tiny bit of the oil/dust form that wound up in cake, someone with severe allergies could get sick. Also, what if someone becomes ill from something else they ate during the same meal they had your cake but blame you. They are allowed to sue, whether they would win, who knows, but still a huge headache and stress if you aren't properly protected. You would be amazed at what people have sued for and won. A well publicized case where a woman burned herself from placing a cup of hot coffee from a drive-thru on her lap comes to mind - she won. Burglars sued for being injured upon breaking and entering and won. Anyway, I'd rather spend time and $ for peace of mind.

summernoelle Posted 9 Jan 2009 , 6:32pm
post #14 of 23

Are you talking about incorporating, or forming an LLC?

I have seriously considered forming an LLC to help protect my home, etc, in case of something terrible like a lawsuit. A couple of weeks ago someone on here was talking about a baker who got sued and lost, for $500k. and that she lost her home, her marriage, everything.

Of course, I think it is ridiculous that you can get 500k because you barfed for a day after eating a cake, but whatever. That's where we are in this country, so it's best to protect yourself.

FullHouse Posted 9 Jan 2009 , 7:35pm
post #15 of 23

I am an "S" corporation, that way I won't have to pay taxes on myself and the corp. earnings. Her life turned upside down over a cake, that is truly awful. Sad that we need to go through so much to protect ourselves.

IcedTea4Me2 Posted 9 Jan 2009 , 7:41pm
post #16 of 23

Anyone have a link to the post about the baker who was sued? I missed that.


springlakecake Posted 9 Jan 2009 , 7:47pm
post #17 of 23

Yeah I would be interested in reading that thread too.

Anyway, I am most of the way through construction of my legal kitchen. I formed my business a few months back as an LLC. I did it on legal zoom (it was mentioned earlier in this thread). I think it cost me a couple hundred bucks. After reading all about the different types of business entities, it seemed the simplest. I havent really done much with it yet since I am not legal. I did open a business sam's club membership!

tinygoose Posted 9 Jan 2009 , 8:55pm
post #18 of 23

You may also want to talk to your insurance person. You might be covered by a umbrella policy or could get business insurance to cover you if anyone gets sick.

indydebi Posted 9 Jan 2009 , 9:30pm
post #19 of 23

When I switched from sole prop to LLC, I specifically asked my attorney about the "protecting my personal assets" because, as I asked him, "People will just sue the company and me personally, so how does it protect me?" His response was that he would get the "suing me personally" part thrown out in a heartbeat. First rule in law is "list everyone on the initial lawsuit". But he would show that the personal lawsuit would not apply and get it kicked out.

(I think I have a great attorney!) thumbs_up.gif

Carolynlovescake Posted 9 Jan 2009 , 10:24pm
post #20 of 23

That was me with the $500k friend.

Here's what I said in that post...


I had a good friend in California get caught and it cost her nearly $500,000 (yes that is five hundred thousand dollars) before it was said and done. She lost her home, the stress over it cost her her marriage, and her baking reputation 10 years later is still in the toilet AND her paychecks are still being garnished over it.

That $500K went to fines, lawsuit settlements from the consumers who became ill from her food and had a justified reason to sue her (which caused her to be exposed baking and operating illegally), IRS back taxes owed (they were not kind), health department fines, fines for operating with out a business license in her city, county and state, and legal fees.

Sweet_Guys Posted 9 Jan 2009 , 10:40pm
post #21 of 23

Now I know each state is different in terms of the fees for LLCs, but here's what it is in Florida:

You fill out the initial creation of the LLC. Peter and I did it as an LLC partnership. There are also LLC sole proprietorships and LLC incorporations. An LLC may have up to, I think 80 people or companies as it's members. So the sole is 1, the partnership is 2, and the incorporation is 1 or more. I know, that sounds confusing. We paid $125 to set it all up.

By May 1 of each year following the year of set-up, we have to pay a $50 filing fee.

The only other paperwork we do is the yearly partnership tax return and then I use the schedules to prepare our taxes.

The thing about an LLC is that as 1 or 2 you can have your intiial "meeting" and say we're going to do it. You don't need to have annual meetings or deal with stock or anything like a corporation.



FullHouse Posted 9 Jan 2009 , 11:57pm
post #22 of 23

My DH and and I are the shareholders in our Corp. My DH, my dad, & myself make up the Board of Directors, so our annual meeting was pretty simple.

littlecake Posted 10 Jan 2009 , 12:23pm
post #23 of 23
Originally Posted by IcedTea4Me2


I know of several people who got food poisoning at different eating places...don't ya'll?...did they ever sue them?

I can't tell you if people in those cases sued or not, but I can tell you this. I am a court reporter and I have plenty of job security. People will sue for anything or nothing.

have you seen a lot of food related cases in your career?

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