How to Start Up a Restaurant

If you're ready to open up your own restaurant, consider which legal structure is the best bet for your business. Whether you're opening an independent food truck, establishing a family-owned diner, or investing in a restaurant chain, there's a wealth of options to choose from when starting up a restaurant. Once you know if you plan on operating solo or with a partner, then you can choose the legal structure that fits your business.

What's the Best Entity to Form?

If you, and only you, want to call the shots... Form a sole proprietorship. With this entity, the owner is the business. This offers the advantage of exercising complete control over the restaurant, along with being an affordable entity. However, since the business is not a separate entity, a sole proprietorship holds you completely liable for all of the company's debts. Without tax or liability assistance, you are held responsible for everything from debt to lawsuits.

If you're opening a restaurant with family... Form a partnership. Want to open up an eatery with a family member or friend? Consider forming a partnership so you can both share profits and losses. With this structure you can make decisions together, like being unable to transfer interest in a business to another without the express consent of all other partners. Just remember that you will be held liable for these decisions, along with the actions of your business partner.

If you want to create a restaurant chain... Form an LLC. Incorporating provides great benefits like saving money on taxes and protecting your personal assets with liability protection to keep the assets of the owner separate from that of the business. If your restaurant starts to take off, keep in mind that LLC structures are not public, but you can switch to a public legal structure, like a C -Corporation, later on.

Why Your Restaurant Needs This Legal Structure

In 2016, restaurants continue to have a higher failure rate than most startups. According to CNBC, 60% of restaurants fail in their first year and 80% close before their fifth anniversary. While many things like location and word of mouth can be attributed to a restaurant's success or failure, choosing to avoid forming a legal structure is financially detrimental for the owner and business.

Of the three entities we listed above, your best bet is to form an LLC to ensure that your personal and professional assets are protected separately. Without this kind of protection, you will be held liable for the business. Don't delay the process! Form an LLC with the help of our experts who make it easy to file your documents so you can return to perfecting your recipes to share with the world.

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