🏛️LLC, sole prop, or S corp? Start simple, upgrade on purpose
In the U.S., most cottage bakers begin as a sole proprietorship — you and the bakery are the same taxpayer until you form something else. That is fine for early sales. As revenue, wholesale accounts, and risk grow, an LLC (and sometimes an S corporation tax election) can protect personal assets and tidy up banking. This is a map for talking to a CPA, not legal or tax advice.
Match your structure to profit and risk — not your follower count.
👤Sole proprietorship — The default when you start. You report profit on Schedule C with your personal tax return. Cheapest and simplest. Downside: unlimited personal liability — a product claim, delivery accident, or market injury can reach your home and savings.
🏢LLC — A state-filed company that usually separates your personal assets from the bakery. A single-member LLC is often taxed like a sole prop unless you elect otherwise. Common upgrade when you have steady revenue, employees, equipment leases, wholesale contracts, or a commercial kitchen. Expect state filing fees and annual reports.
📊S corporation — A federal tax election (IRS Form 2553), not a separate thing you “open” at the bank. You run payroll, pay yourself a reasonable W-2 salary, and may take remaining profit as distributions that can reduce self-employment tax. Have an accountant model it once net profit is consistently strong — payroll and extra filings often cost more than you save on smaller incomes.
🪪Either way: get a free EIN from the IRS for W-9s, open a dedicated business checking account, and keep your bakery/DBA name on labels while your legal entity name goes on tax forms and payment onboarding.
🍞Where Loafaly fits
Bakery profile is your public bakery name and address on labels and orders. When you connect card or online payments, use the same legal business identity your CPA files — keep those names aligned. Dashboard → Taxes & accounting tracks revenue, expenses, retail COGS, mileage, and Schedule C–friendly CSV exports to hand your accountant, whether you stay sole prop or form an LLC.
