The Chocolate Life

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I am getting prepared to open my chocolate company legally. It will be a side gig to my full time job and I don't expect it to be huge anytime soon. I was wondering what business structure makes the most sense to start with, Sole Proprietor or LLC. What business structure did you start with and why?

Thank you!

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If your chocolate venture is just a part time passion while you work a job, don't even bother considering a formal corporate structure such as an LLC.  There is expense involved, time involved, corporate filings, and regulations that you need to follow.  Some of those regulations can also mean involving other professions such as accountants, and lawyers and so forth.

 

Your chocolate venture right now is a part time hobby that makes you some side money.  If you want a trade name, you can register that, and attach the trade name to your personal bank account in the event that someone writes you a cheque in your "business name" instead of personally.

 

Chocolate is a low risk confection so the likelihood of you getting sued over a "bad truffle" is about as likely as winning the lottery.  In fact in the 9 years I have been researching this industry I've never heard of it.

 

How many artisans at Farmers Markets all over the globe are set up as corporations?  Hardly any.

 

As someone who's spent 100's of thousands of dollars on corporate infrastructure, and also manned booths at farmers markets, I say keep things simple, enjoy your hobby, and enjoy making a bit of money from it.  When you're poised to take over the chocolate world, THEN worry about the complexities and cost of corporate structuring.

I agree with this post. You get liability insurance. You need to! You also should carry an umbrella policy on your homeowners/car insur. Get one million or two million. You have very little exposure to risk in what you are doing. Lawyers and accountants love when you get incorporated b/c they can charge you more. The State does as well-since they get more in fees and tax from you. Good luck.

I've opened a number of businesses and I've gone with a LLC each time. I agree with most of what Brad says, as I usually do, but personally I would still never open a business as a sole proprietor. If it was thousands of dollars to create a LLC I would understand any reticence, but your attorney can do this for a few hundred bucks. It's really a no-brainer. Remember, you're making and selling things that people eat. And yes Brad is correct about the relative safety of chocolate. You will most likely never have a problem. But then again, you (or someone who works for you) may someday give a chocolate-covered nut to the wrong person, who will then proceed to go into anaphylactic shock right in front of you and the entire Farmer's Market. Things happen.

Side note - do not try to save $100 on legal fees by using a form you bought on the internet. Reasonable and legitimate legal fees are a cost of doing business. You either learn up front to accept that, or you pay the price later. You wouldn't try to do your own dental surgery. Don't try to be your own lawyer. 

As for taxes, a LLC does not greatly complicate your tax situation because with a LLC the taxes just all pass through to you. Yes, there's some extra paperwork. But if you've got a small business, and you track your payments and receipts using even Quickbooks, your accountant can probably do your business taxes in a couple of hours.

I did the LLC filing myself on-line in New Jersey.  Did not need an attorney.  We already use an accountant for our taxes and she started deducting business costs for development last year and we will do so again this year.   Next year will have to start selling.

I went ahead and formed an LLC online, the paperwork was quite straight forward and I got some help from friends who recently started their own LLC as well. Because it's just me and I don't have a business partner, the paperwork is pretty simple. If I were to get a business partner in the future, I will go through a laywer. And setting up an LLC was only $50 more than a business license for a sole proprietor. 

Thanks for the input everyone!

Congratulations! You are now the President and CEO of the next global chocolate conglomerate!

I would like Choklat to be the first of your many mergers and acquisitions on the rise to stardom.

...and remember, the less seriously you take your new-found venture, the more fun you will have and the more money you will make.

Cheers

Brad

Thanks! I don't plan to leave my day job, so that will help keep it fun :) And thank you Brad for this site! It's been very helpful!

Kaydee

Draft Chocolates LLC

http://draftchocolates.com/

http://www.kickstarter.com/projects/800768255/draft-chocolates

Congratulations on reaching your Kickstarter goal!  Your kickstarter page is impressive and well organized. Great work!

Thank you!

I have to agree. I knew very little about kick starter before I went to your page last night. I had no idea you could use it for something like this. How much work did that take?

I spent several months planning the Kickstarter. And spent a lot of time promoting it once it went live, including having a local event where I gave away free samples and did a beer pairing with friends who are starting a brewery (who I met through their Kickstarter last fall). You can read about it in the updates of the project. And the hard work of a well thought out project is just the beginning of all the work  I have ahead of me!

Don't thank me for the site Kaydee.  I'm just a contributor.  Clay Gordon is the guy who owns it.

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