What Type of Business Structure is Right for Your Restaurant?

If you’re opening a restaurant, you’ll need to choose your business structure. This is trickier than it sounds – Limited Liability Corporations (LLC) are so similar to sub-corporations that it can make choosing one or the other confusing. Often, New York State attorneys get asked the question, “Which one’s right for me?” While you should always speak with a business attorney as you go through the process of setting up your restaurant, knowing the basics of restaurant entities is still valuable.

Small Eateries

As a general rule, for smaller operations you should choose between an LLC or what is known as an Sub Chapter S Corporation “S-Corps” when opening a brand new bar, restaurant or hotel in New York state. “S-Corps” have to adhere to a certain protocol, which includes holding annual meetings and keeping the minutes of those meetings; appointing officers; and giving owners corporate stock. LLCs don’t have any of these requirements.

Also, an LLC doesn’t require the owner to receive an equal share of the profits and losses. In a sub-corporation, an owner who has half of the shares also receives half of the profits or losses.

LLC Drawbacks

LLCs have their downsides, though. When you register an LLC, you have to comply with a publication requirement. Within 120 days after you file to become an LLC, some type of notice has to be published every single week for six weeks in a row. The notices have to be published in two different newspapers from the county where your office is located. One of those newspapers has to be printed daily while the other can be printed weekly. This requirement makes the formation cost of an LLC much higher than an S-Corp.


A third entity, the C-Corporation, may be the proper entity for you when you are considering opening up a large operation and you don’t have the necessary capital.  This business structure will allow you to sell shares and build up investor capital to start your project.

Getting Advice

You should always seek the advice of a tax professional and a business attorney to determine which entity may benefit your business more, as this varies with owner-operated or manager-operated companies, as well as the number of employees you intend to hire. It may also vary with respect to your personal income and other investments you may have.

The good news is that either way you turn, you’ll benefit from liability protection.

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