These days you don’t need a storefront to have a bakery. You do need to understand the local cottage food laws, though. And, while starting a legal home bakery may require jumping through some hoops, you are creating an opportunity for you and your family by turning your hobby into a business. If you want to know how to pay yourself when you own a home bakery, read this post.
To operate a legal home bakery, you need to understand your local area’s rules and regulations, invest in professional legal and accounting services, obtain appropriate licenses and permits, get food safety training and insurance.
What Are Cottage Food Laws?
Per the Food Law and Policy Clinic’s 2018 report, under the laws in every U.S. state, food generally must come from regulated and inspected food establishments. Almost every state has created exceptions to these requirements for certain “cottage foods” (homemade low-risk foods such as baked goods, jams, and granola).
These laws balance food safety concerns with local business development by allowing home cooks to make and sell certain low-risk foods without undergoing the full inspection and other certified kitchens’ regulatory requirements.
In summary, for specific low-risk foods, you are allowed to legally bake and sell from your kitchen as long as you follow your state’s cottage food laws.
Research Local Cottage Food Laws
Your first step is to research the cottage food laws in your area. It doesn’t matter what you have heard through the grapevine or what you have seen others do in your hometown; if this is going to be a business, you must know your requirements and limitations.
Here are just a few examples of varying rules in the United States around what you can and cannot do:
- In Mississippi, cottage food operations can sell up to $20,000 of products per year. ($20,000 in gross annual sales.)
- Cottage food operators cannot hire employees of any type, not temporary, full-time, part-time, or volunteers in Florida. You must do all of the work yourself and, if you offer delivery, you have to be the person who handles that.
- In Virginia, you cannot sell with the intent to be used in (or offered for consumption at) retail food establishments.
- There is no registration, fee, or process to get set up in Indiana, and there is no limitation to how much a vendor can sell, but the foods may only be sold at farmers’ markets, and roadside stands within the state.
- In Idaho, cottage foods can be made in a person’s home or other designated location and sold directly to consumers within the state of Idaho, through farmers’ markets, home sales, roadside stands, online (in-state), mail order (in-state), personal delivery, or delivery service.
- In Colorado, you need to complete a food safety course.
- Kitchen inspections are not required in Arizona.
- In New Jersey, it is illegal to sell baked goods made in your home kitchen because it has yet to pass a “cottage food” law.
- In Hawaii, only direct (in-person) sales are allowed: online and indirect (restaurant and retail store) sales are not allowed. There is no sales limit, and home cooks must take a food safety course.
- In Tennessee, you can forgo a kitchen inspection and permitting but must display signage alerting consumers.
- In Alabama, cottage food cannot be sold to restaurants, novelty shops, grocery stores, or on the internet.
- As in many other states, you must label your products with specific language and font size in Connecticut.
- Texas has a handy cottage food checklist.
It’s important to note that these are by no means the complete rules. I merely highlighted a key point from several states to illustrate the differences. Be sure to research all the rules, so there is no confusion.
Invest in Professional Guidance
Think about investing in professional legal and accounting advice, so you have a firm grasp of your business fundamentals from the start. Don’t let asking for advice intimidate you. Experienced professionals can provide valuable information and help you avoid costly mistakes.
Professionals can help you determine if an LLC is the best course of action. Or perhaps given your circumstances, there is another alternative that makes more sense.
Food Safety Training
Some states require state-specific training or have specific licensing requirements. Even if a food safety class or food handler’s permit is not required, I recommend taking a class like ServSafe. There are some basic guidelines that everyone should know before preparing and selling food to other people.
Permits and Licenses
Separate from the rules allowing you to produce and sell food, you need to investigate what business permits or licenses are required from your state or municipality.
It’s prudent to have insurance for any business you operate. You can’t assume that your homeowner’s insurance policy will cover your home business. You must carefully evaluate your current policies and then find an insurance agent who has experience in the food industry. FLIP is a company that specializes in liability insurance for small food companies that I have seen mentioned in various online groups.
My Home Bakery Experience
It’s worth noting that I am not a lawyer or accountant. I am sharing information based on my personal experience and research. Again, I suggest you consult with an accountant and attorney.
When I launched my home bakery, a representative from the Department of Agriculture and Markets inspected my kitchen. She asked me questions to ensure I was set up safely and understood the limitations of the permit.
Although not required, I took the ServSafe Food Manager Certification class. I attended a local college for the in-person course, which was a few weeks long and culminated in a test.
Generally, I have found that people will help if you simply read the rules and call with questions. I was polite and friendly to everyone. In my area, it’s a small number of people that handle cottage food laws. I took notes from any phone conversation with the name and title of the person giving me info. As a standard business practice, I followed up with an email outlining everything discussed and sent it to them, thanking them for their assistance.
Take Advantage of Free Support for Small Businesses
Also, consider taking advantage of free help from the Small Business Administration’s SCORE, the society of retired executives. SCORE offers free advice from professionals with real experiences and skillsets. You can request a mentor who will work with you over the phone, via email, in person, or via video on a topic you choose.
There is the Women’s Enterprise Development Center (WEDC) in my local area, which opens doors to business ownership for low-to-moderate income women and minorities. WEDC’s mission is to empower entrepreneurs to build successful businesses by providing high-quality training programs, advisory services, and capital access. A simple Google search for your area could produce other small business resources.
Participate in Online Groups
Facebook has dozens of groups around home bakeries, cottage food laws, etc. There are even specific groups for bakers based by state. Join a few groups and see what questions arise around legally having a home bakery. Groups can be a valuable resource.
Start Your Research Today
Starting any successful business requires planning and involves legalities, some more complicated than others. It may seem overwhelming at times. You may wonder how anyone gets through this process, but take one step at a time. Ask a lot of questions, write everything down, and keep moving forward.
RESOURCE: Still on the fence about whether you are ready to turn your hobby into a business? Read my previous article about questions to consider.
Have you gotten my Essential 5 P’s for Perfect Product Pricing pdf yet? I created this freebie to take the guesswork out of determining how much to charge for baked goods. Sign up for my email list and your very first email has the pdf.