If you’re thinking of opening a bakery business, like any company that sells food to the public, you must be licensed by your state, county, or city.
In fact, in most jurisdictions, bakeries are treated as food establishments and must obtain a permit from the health department.
Licensing requirements to open a bakery vary by state, county, and city. Other considerations include the scale of your operations and whether you operate a storefront bakery or a home-based bakery business.
If you’re asking, “what licenses do I need to open a bakery?”, read on.
The baker in you wants to spend your days making chewy cookies and decadent cakes. The entrepreneur in you wants to be your own boss and call the shots. But the realist in you knows that you may not have the resources or the time to start your own retail bakery.
The solution could be a home-based bakery!
This type of small business lets you bake to your heart’s content, be your own boss, and work from home, instead of leasing an expensive storefront and hiring a squad of employees.
If you’re trying to figure out how to start a bakery business from home, you’re in the right place. Here’s a step-by-step guide to turning your home kitchen into a small-batch production powerhouse.
The Food Safety and Standards Authority of India (FSSAI) implements the Food Safety and Standards (FSS) Act, 2006 and FSS Regulations, 2011. It ensures food standardisation and covers a large base of food products from restaurants to home bakers.
Home bakers are people who bake food at home and sell them. It could also be a cottage industry that caters to consumers’ needs from their own residence. The home bakers and cottage industries should register themselves with FSSAI.
Not Sure If You’ve Got the Skills to Start a Home Baking Business?
A home bakery is a business, just like a retail bakery. While it has its own set of rules and regulations, it must still abide by the same principles of great baking, customer service, cost control, and marketing.
5 Steps to Starting a Bakery Business From Home
- Create your business entity and acquire the proper licenses.
- Plan the bakery menu.
- Get the right equipment and supplies.
- Review your overhead costs and price your products accordingly.
- Start baking!
If you’re not sure if you have all of these skills, it may be time to invest in an education by attending pastry school to help you with both the pastry and business skills. With Escoffier’s online program in baking and pastry, you can earn a diploma or an associate degree—from home—in less than 60 weeks!
*Information may not reflect every student’s experience. Results and outcomes may be based on several factors, such as geographical region or previous experience.
What do I need to start a bakery business?
In addition to applying for the appropriate bakery license and general licenses or permits, here are some of the things you may need when starting a bakery business.
- Business plan: A well thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your bakery business.
- Business structure: Your choice of business structure – whether it’s a limited liability company (LLC), corporation, or partnership – will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets.
- Business name: When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.
- Federal and state tax IDs
- Insurance: You may need general liability insurance and may be required to have Workers’ Compensation insurance if you have employees.
- Website and marketing plan: In addition to helping you market your new bakery business, a marketing plan can help keep you on track budget-wise and convince lenders that you have a plan to succeed in this crowded market.
Starting a Home Cooking Business in Colorado
Q: I need a license to prepare meals in people’s homes. Can you help?
What is the Colorado Cottage Foods Act?
The Colorado Cottage Foods Act allows Coloradans to sell non-hazardous foods directly to consumers without needing to get a license or have your kitchen inspected by the Colorado Department of Health and Environment (CDHE). For example, if you’re a great baker and want to sell sourdough loaves to people in your community, you could do this from your home, without getting a business license or renting a commercial kitchen. Here are the foods that are considered cottage foods:
- Pickled fruits and vegetables with a pH of 4.6 or below
- Dry spices
- Dry teas
- Dehydrated produce
- Nuts and seeds
- Honey, jams, jellies, and preserves
- Candies, chocolate, and fudge
- Tortillas and similar products that don’t need to be refrigerated
- Baked goods
- Roasted coffee beans
- Butter cream made from vegan ingredients (not real butter)
- Canned fruits
- Freeze-dried produce
- Up to 250 dozen whole eggs per month
While you don’t need a license to sell cottage foods in Colorado, you’re still required to take a food safety course that has been approved by the CDHE.
Do I need liability insurance as a cottage foods business?
Probably. Even though cottage foods are non-hazardous, there’s always risk involved when selling food, so it’s a good idea to have insurance. If you get sued by a customer, liability insurance covers potential legal fees, medical expenses, settlements, and judgments. Plus, many farmers’ markets require their vendors to have liability insurance.
What foods can’t be sold as cottage foods in Colorado?
Here are the foods that AREN’T considered cottage foods in Colorado and thus can’t be sold without licensing and inspection:
- Foods that require refrigeration for safety
- Any meat or fish products, including jerky
- Baked goods that contain cream, custard, butter cream frosting, etc.
- Homemade beverages
- Pumpkin or sweet potato pie
- Sauces and condiments
- Cut fresh fruits and vegetables
- Fresh pasta
- Flavored oil
- Jams or jellies made with fresh or home-dehydrated peppers
- CBD and THC products
What are the limitations of selling cottage foods in Colorado?
Besides restrictions based on the type of food, there are other restrictions to selling cottage foods in Colorado. Here are the requirements for selling cottage foods:
- Must be a sole proprietor or a Colorado LLC with no more than two members.
- Must be present to answer questions in person to the consumer.
- Can’t make more than $10,000 in revenue per product.
- Can’t sell at restaurants or grocery stores.
- Must include a label with the product name, producer’s name and address, production date, ingredient list, and disclaimer statement saying the food was produced in a home kitchen.
How do I get a Retail Food Establishment License?
If you want to sell foods other than what is allowed by the Cottage Foods Act, you’ll need a Retail Food Establishment License. First, you’ll need access to a commercial kitchen. Most home cooks rent a commercial kitchen to meet this requirement. To apply for your Retail Food License, you’ll need to send a plan review packet to your local health department, which should include:
- Menu and food handling procedures.
- Floor plan and equipment layout.
- Mechanical diagrams for plumbing, lighting, electrical, and ventilation.
If your plan is approved, the health department will contact you to schedule an inspection. Fees will vary depending on your local health agency. For the CDHE, the fee to submit the plan review packet is $100, and the fee for the inspection itself is a maximum of $580. You will also need to pay an annual license fee, which will vary depending on the size of your cooking operation.
Will I need any other licenses?
Check out our complete guide on How to Start a Business in Colorado.
This entry was posted in Opinion.
Do You Need an LLC for a Home-Based Bakery? Other Permits?
Are you required to get an LLC for a home-based bakery? I’m going to answer this up front: no. You don’t need an LLC or a Limited Liability Company to open a home based bakery even if you live in an apartment. Some bakers decide to form an LLC to add a layer of protection between their business and personal assets or for tax advantages. Like most other businesses, whether big or small, the choice is yours to register the entity as an LLC (or not).
Personally, I formed my LLC here for only $49 + State Fees. You can read my full review of the filing process here. But I’ve been in business awhile so it makes sense for my situation to make things official.
So what’s the best business structure for a home-based bakery? What permits will you need to get? In this guide, I walk you through the details and help you make an informed decision. Ready to turn your passion for baking into a profitable business? Let’s do this.
What are the legal requirements for a home based bakery?
Starting a home based bakery could be a fun and profitable creative outlet if you enjoy the process of making everything from cookies to cakes. But you’ve got to get the nitty gritty business details settled before you start your business so you can dive right into the baking and having fun part.
So what do you need when you start a home based bakery? Here are some things you should know about:
Check your local state laws – Each state has different laws when it comes to running a home based business. It’s advisable to check your local state laws to get a clear understanding of whether or not you are allowed to run a bakery in your home.
Many first-time bakers start what is called a Cottage Food Business. These cottage businesses are available to open in all 50 states, however, the rules vary greatly by state to state. These cottage food operations were formed to help small food producers get started without the high-costs of requiring a lease at a commercial kitchen.
When it comes to operating a home-based business there’s usually a limited number of volume and only certain items that can be baked out of the home kitchen. For example, if you live in California, you’ll be limited to $75,000 in annual food sales out of your house. But other states like Idaho, don’t place limits on annual revenue for these producers. Keep in mind that if you decide to operate a higher-volume food business, you may need to structure the business using a that won’t cap sales entity.
Check if your baked goods are allowed – There are some items that may not be allowed to be sold in home bakeries. Check with your state what items are acceptable.
Cottage Food Businesses only “low-risk” foods can be cooked and sold. These low-risk items will vary depending on where you operate, but typically baked goods like muffins, cookies, and cakes are fall into the safe category. Whereas anything using raw eggs will be restricted. Of course, you’ll want to check to confirm the rules in your state.
Register your business – After confirming that your local state laws allow a home based bakery, it’s time to register the business. This is the part where you decide on what business structure to use.
Apply for Licenses, Permits, Certifications, and Health Requirements – Be sure to apply for the necessary legal requirements such as licenses, permits, certifications, and health requirements. Some of these can be zoning permits, occupational licenses, food safety certification, and health department permits. Again, these depend on each state.
Here are some other permits / requirements to investigate further:
- Does your HOA allow a home-based bakery? Admittedly, you may be able to work around this, but it’s worth knowing.
- Do you need a kitchen health and safety inspection? You might need to even if you’re opening a cottage food business.
- Food handlers license? Some states will require you to get a food handlers license. This is a training program that ensures you know how to handle food safely. You’ll need to do some studying to complete this training, but most people can complete this step in a day or two. Best of all, you can study and complete this this ServSafe test online for under $50 in most states.
The business structure mentioned above is of great importance when you register your business. Here are the different types of business structures you should know:
From the name itself, a sole proprietorship is a business structure that only has one owner. The profits that the business receives are filed through the owner’s personal income tax return. If you’re the only one running your home based business this business structure is an option.
I operated as a sole proprietor for many years. This is an uncomplicated way to operate a business that you self-fund and earn cash. The downside risk of this business is if you end up getting sued by an unhappy customer, they can go after your personal assets like home and savings. There is no limited liability protection if you choose this type of business structure which means if you run into any legal trouble, you will be held reliable and your personal assets are pursued.
A partnership is a business structure that has two owners. Taxes are filed the same way as a sole proprietorship. If you’ll be running your bakery at home with a friend or partner, this is applicable for you. But just the same as a sole proprietorship, there is no limited liability protection.
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Unlike a sole proprietorship and partnership, corporations have limited liability protection.
A Limited Liability Corporation, also known as an LLC, can be owned by one person or more. It can also be owned by a corporation. Profits are given to the owners and they file these in their personal tax returns. From the name itself, an LLC has limited liability protection
Do you need an LLC for a home based bakery?
As answered above, no, you do not need an LLC for a home based bakery. However, you can choose to do so if you want, especially if you want more protection for your assets. I formed my LLC here for $49 + state fees. It took me less than 45 minutes to form this business entity and I was officially in business.
Can you start a Cottage Food Business as a bakery?
Cottage food is defined as products that are not Time/Temperature Controlled for Safety (TCS) food. In other words, these products should not be potentially hazardous.
Every state has a list of what items are allowed as cottage food. Luckily for you, baked goods such as breads, biscuits, rolls, cookies, pastries, and cakes are allowed just as long as they do not require refrigeration.
Please note that cottage food products are also only sold directly to consumers. Wholesale selling is not allowed. This means you won’t be able to get baked goods placed in grocery stores or coffee shops.
Another distinction with this is that the food must be prepared in your home kitchen. You can’t bake your food at someone else’s kitchen that hasn’t been approved.
Can you operate a home bakery as a sole proprietorship?
Absolutely! In fact, home bakeries are ideal for sole proprietorships since a lot of home bakeries are run with only one owner and minimal staff. Unless of course you’ll be running the business with another person then a partnership should be used to register the business.
What licenses do you need for a home based bakery?
Home based bakeries require several licenses which depend on local state laws. But here are a few licenses that you should take note of:
- Business License
- Zoning Permits or Licenses
- Health Permit / Food Handling Permit
- Home Bakery Certificate / License
Some states don’t require licenses but this depends on the cottage food product.
What are the kitchen requirements for a home baking business?
As a general rule, personal items should not mix with your work items. You may be cooking at home but it’s advisable to have separate kitchen equipment for your business.
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Some of the equipment that you may need to purchase are:
- Additional sink
- Separate food storage
- Separate food preparation counters
- Proper ventilation system
- Cleaning supplies
You’ll also need to purchase and install safety systems, especially fire extinguishers, a sprinkler system, and an exhaust system.
One other note I need to call out. Do you own a pet like a dog or cat in the house? Depending on the state you might not be able to bake with an animal on the property. This is another distinction to look into before getting started. At the very least, you’ll want to ensure your four-legged friend is not present during the baking process for food safety.
Do you need insurance?
Getting insurance for your business will help you sleep soundly at night. They may be a bit costly but an insurance helps protect you and your business.
For instance, if a customer gets sick from a baked product you sold it could result in a total financial loss from covering the customer’s medical treatment. Having insurance will reduce the risk of this type of total financial loss. One type of insurance you could apply for is a Product Liability Insurance which would cover the type of situation mentioned.
If you’ll also be hiring staff to help increase sales volume, it’s advisable to get insurance for them as well in case of injuries and accidents suffered from working at your home bakery. When it comes to working with potentially dangerous equipment like hot ovens or mixers, it makes practical sense to carry this type of insurance.
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Step 1. Verify that your product can be manufactured from the home.
Low risk foods are the only products allowed to be processed in your home kitchen. Low risk
food products are items that are shelf stable and do not require refrigeration or freezing. These low-risk food products may include:
- Baked goods that do not require refrigeration
- Jams, jellies, and preserves
- Dried mixes/Spices
- Some liquids (i.e. ice tea, coffee, lemonade, etc. )
- Some sauces (i.e. balsamic dressing, etc. )
- Acid and acidified foods (i.e. pickles, bbq sauce, etc.)
- Freeze dried fruits/vegetables
- Refrigerated or frozen products
- Low-acid canned foods (i.e. jarred fruits, vegetables, etc. )
- Dairy Products
- Seafood products
- Bottled water/Juice Products
- Bakery products with cream or cream cheese fillings; cheesecakes
If you are uncertain if your canned goods are low-acid or acidified or are interested in starting a commercial business, please contact an Agricultural Compliance Officer at (984) 236-4820 for guidance.
Step 2. Do you have a pet that comes in your home at any time (even if only at night)?
If so, you cannot manufacture foods from your home kitchen as this practice is a violation of the Good Manufacturing Practices (21 CFR 110). As a home processor processing food for sales, you are viewed as a Food Manufacturing Facility.
Step 3. Check your home processing area to ensure it meets federal food safety requirements.
Your home processing area must meet the standards set by:
- Code of Federal Regulations (21 CFR 110) also know as Good Manufacturing Practices (GMP)
- N.C. Food, Drug and Cosmetic Act.
Additional regulations are required for pickled (acidified) foods:
- Food contact surfaces must be smooth and easily cleanable.
- Home must be free of insects, rodents and other pests including privately owned pets (see step 2).
- Kitchen and bathroom sinks must have adequate hot and cold running water and must be easily accessible from the processing area. In accordance with Good Manufacturing Practices (GMPs), the kitchen sink can only be used for food preparation. Hand washing must be done in a separate sink or bathroom sink.
- Thermometer must be kept in the refrigerator and freezer to monitor temperatures.
- Waste must be carried away from the house in an acceptable fashion (sewer or septic system). Areas in and around the processing area must also be maintained in a condition that will prevent any of the food products, equipment, and supplies from becoming contaminated.
- All light bulbs in the kitchen must have protective shields made of non-glass material or have shatter-proof bulbs.
Please see the “Additional Information” section for details on the inspection process and what to expect during the actual visit to your home.
Step 4. Contact your local planning/zoning department
Once you have determined that you qualify for a home-based food business, you should check with your local planning office to determine if you are permitted to operate a food business from your home and if permits are required. You should also check with your Homeowners Association (HOA) or your leasing office (rented home or apartments) to ensure a home-based business is allowed. County government link:
Step 5. Municipal/Well water
If your home uses municipal/city water, you will need to provide a copy of your most recent water bill or letter from your leasing office if your bill is part of your rent. If your only water source comes from a private well, then the water must be tested for coliform bacteria and E-coli before an inspection is made. Test results must be within one (1) year of submitting your application and must be attached with your completed application. It is recommended that you contact your local health department for well water testing, however. Testing is also available through private companies as well.
Step 6. Develop your business plan
- Provide a detailed list of specific types of products by name that will be produced
- Indicate where the home kitchen is located (i.e. separate room, converted garage, etc.)
- Complete and detailed list of ingredients used and the suppliers
- A plan for storage of supplies, equipment, ingredients, and finished product
- A general production flow including procedures and equipment used
- Describe how your product(s) will be transported (i.e. personal vehicle, food truck, etc.)
- List of potential locations where you plan to sell your product (i.e. retail from home, farmers market, local businesses, etc.)
Some products may also require additional evaluation. For example, “Apple Butter” would need to be evaluated because there is no standard of identity for this product as on the other hand, “Apple Jelly” would not need further evaluation
The NCDA&CS Marketing Division may also be able to provide additional help developing a business plan. Please visit www.ncagr.gov/markets/agbizmarketing.htm
Step 7. Food product labels
1. Product name
2. Manufacturers name and address
3. Net weight of the product in ounces/pounds and the gram weight equivalent
4. Complete list of ingredients in order of predominance by weight
The only exemptions to having an affixed label is if the product being produced is sold on demand directly to the consumer. This may include picking up orders from your home, delivering finished products to the consumers, or delivering products to special events (i.e. weddings, birthday party, etc.). Selling products from farmers markets or similar venues may also be exempt from having a label, however. Ingredient information must be available upon request by the consumer.
More information on labeling requirements is available at:
Step 8: Complete the Application for Home Processing Inspection
Complete the Application for Home Processor Inspection (link to PDF). You can either mail or email the finished application along with the required documents to the mailing or email address listed below.
Within six (6) to eight (8) weeks of receiving your application, a Food Regulatory Specialist will contact you to arrange a home processing facility inspection, however. Please keep in mind that this is only an approximate timeframe, and it may take longer for an inspector to contact applicants during the holiday seasons or if they have a busy schedule.
- Acid/Acidified foods
- Homemade Cream Cheese Frostings
- “Moist” breads/cakes, and some pies
- Any questionable products
Once complete, the laboratory where your product was tested will provide you with a Process Authority Letter . A copy of this letter must be submitted along with your application for review. Additionally, applicants planning on producing acidified food products may be required to take an Acidified Food Course and must also provide a Certificate of Completion along with your application.
The Inspection Process
A home-based kitchen inspector checks the kitchen to be sure it is clean, constructed of suitable materials and is free of any pest activity (insect or rodent) including pets. Remember that indoor pets would also be considered pests and are not permitted under the home processing program.
Standard household equipment and appliances are acceptable. The equipment and appliances can be used for both personal and commercial use. Standard household sinks are acceptable. The kitchen should be free of decorative materials which could collect dust. Running water at a suitable temperature and pressure is required. There is not a specific temperature requirement for hot water, as long as it is hot enough to accomplish cleaning and sanitizing of equipment and utensils.
Waste should be conveyed away from the house in an acceptable fashion (Sewer or Septic Tank). Any lights in the kitchen or any processing or packaging areas should be shielded against accidental breakage.
The inspection will be focused on the kitchen and other areas where processing and packaging of products may take place. Areas of the house in which materials, ingredients and equipment are stored will also be inspected. Inspectors may also walk around the exterior of the house to verify that the foundation is intact and will not allow for the entry of pests.
A permit is not issued, but inspectors will alert the homeowner to any possible violations of the
N.C. Food, Drug and Cosmetic Act.
– File for a tax number
There are several types of tax numbers. If a business is planning to have sales, a
Sales & Use Tax number (NC-BR) is required. Businesses having employees are required to obtain a Federal Employer Identification number (SS-4 form) along with a N.C. withholding tax number. The N.C. Business License Information Office can provide application forms to businesses for these numbers.
– Register business name
The type of business structure determines where a business name (assumed name) should be registered. A Certificate of Assumed Name for sole proprietorships and partnerships must be filed with the Register of Deeds in the county or counties where businesses plan to operate. Corporations or Limited Liability Companies must register their business names with the N.C. Secretary of State, Corporations Division.
– Apply for a UPC code
Many retailers now require a Uniform Product Code (UPC) for each product they carry. A UPC barcode allows automated checkout stands to read the name of the manufacturer and the specific product from the barcode. To apply for UPC barcode, visit the GS1 US website or you may contact the company directly.
300 Charles Ewing Boulevard
Ewing, NJ 08628
– Marketing Assistance
Make Sure You’re Legally Set Before Doing Anything Else
A home-based bakery is a business, which means it’s still subject to state and local laws around food, business licensing, and taxes. Additionally, there are nuanced laws surrounding the sale of food items from one’s home.
Here are some general guidelines, but since laws vary from location to location, make sure to consult your local food and business regulatory agencies before moving forward!
Learn Your Local Cottage Food Laws
Home bakeries are generally covered by a section of law called cottage food. This classification separates home-based bakeries from commercial or retail operations that have designated storefronts or production kitchens. Commercial bakeries have to meet certain requirements for equipment and sanitation, while cottage-food operations are exempt from many of those rules.
To make sure these home-based food businesses don’t get too large (in order to prevent large-scale operations from skirting the regulations of a retail bakery), cottage bakeries usually have a sales limitation. They also have rules regarding who you can sell to. A cottage bakery is generally for direct-to-consumer sales only, so you couldn’t sell to a local grocery store or bakery.
The first step in the process is to assess the rules where you live. Your state and local health departments should be able to provide additional information on your area’s cottage food laws.
Create a Business Entity and Get Licensed
When you start a home baking business, there are other legal issues to consider before you tie on your apron. Some states require you to carry a business license to operate your home bakery. You may need a food manager license from the health department as well, depending on your state.
You should also set up a business entity, like a limited liability company (LLC). Setting up a company, versus operating your business as an individual or sole proprietor, protects your personal assets from legal liability in the event of a lawsuit. You may also need an insurance policy. Make sure you check with a cottage food expert and/or an attorney for advice on the best way to proceed.
Organize Your Finances and Plan for Taxes
One of the cardinal rules in business is to always keep your business banking separate from your personal banking. This means setting up a separate business bank account, which you can do once you’ve created your company.
You may also have to charge sales tax and/or food tax on the items you sell. You’ll need to keep careful track of your sales and document their breakdowns so you can ensure you pay the proper amount of local and state taxes.
CT can help
Outsourcing business registration and license research, applications, management, and renewals can help you take the pressure off internal resources. By working with a full-service management provider who specializes in the efficient processing of business licenses you can free up your staff to focus on starting and growing your bakery business while ensuring you keep up with changing compliance requirements.
Food licensing requirements for at-home bakeries
Because a home bakery business (as well as an online business) operates with the goal of generating revenue by selling goods or services to the public, most of the rules designed to safeguard the public and collect tax revenue apply. Below is a list of requirements for your home-bakery.
1. Any food prepared and processed must be low risk
Furthermore, each state issues guidance on approved and prohibited home-prepared foods.
2. Regulations vary by state
Cottage industry laws differ from state to state. For example, Iowa divides homemade food laws into Iowa Cottage Food businesses and Iowa Home Food Processing Establishments. At-home bakery businesses fall under the latter and require the appropriate licensing and inspections.
In New York, businesses can apply for a home processing exemption that typically applies to food manufacturers. This allows them to produce approved food products at home. Any bakery goods sold in New York state must be pre-packaged at home and properly labeled.
3. General business licensing and registrations for home-based bakeries
Home-based bakery businesses must obtain the same general business licenses, permits, and registrations as traditional businesses. However, certain licensing rules are triggered when a business operates from home or in a residential area. These include:
- Home occupation permit: Many city or county governments require home-based businesses to have a “Home Occupation Permit”.
- Signage: If your business is in a residential area, you are likely to face very strict limits on the size, number, and placement of signs on your property.
- Zoning: If you plan to operate a bakery business in an area that is zoned “residential,” you need to become familiar with the zoning ordinances. Certain business activities are prohibited in residential areas.
License requirements for traditional brick-and-mortar bakery businesses
Brick-and-mortar bakery businesses are subject to several licensing, permit, and tax registration requirements. Below is a list of the most common licensing requirements for a bakery business with a storefront:
1. Food licenses, permits, and certifications
These are generally issued by your local health department. You may need more than one license depending on the business activity you conduct. For example, New York City issues permits for food service establishments and a separate one for food processing and/or food preparation.
Some jurisdictions also require all employees involved in the preparation, storage, or service of baked goods in a food facility to obtain a food handler permit.
The application process for food service licenses and permits can be lengthy and must include building plans and inspections. Check with your city’s small business department to find out licensing and application requirements to open a bakery.
2. General business-related licenses, permits, and registrations
• Business operating license: This license is issued by your county or city and grants you legal permission to operate a bakery in your city or state. If you plan to open several locations, you might need a license in each city where you operate. However, some states do offer state-wide licensing, such as Washington, which cover state and local licensing needs. Check your state government website for application guidelines and remember to renew your license annually.
- Federal tax ID (EIN) number: Issued by the IRS, an EIN (also called a tax identification number or employer identification number) is required for almost all types of businesses.
- State tax ID number: Issued by your state’s department of revenue or taxation, the state tax ID number is also called a tax registration number.
- DBA/fictitious business name registration: The doing business as (DBA) or fictitious business name registration happens with the appropriate state or local jurisdiction.
- Zoning and land use permits: Local governments’ zoning laws may prohibit certain business activity in designated areas.
- Building permit: If you plan on remodeling or building a commercial space, you’ll need to get a building permit.
- Sign permit: Before you put up a sign outside your business, you’ll need a sign permit from your city.
- Building health permit: This is overseen by your state or county health department and ensures that your premises meets safety regulations.
- Dumpster license: This allows your bakery to place a state dumpster near your business for the proper disposal of food waste. Check with your city to see if you need one.
- Sales tax license/sellers permit/resellers permit: This license/permit has many names, and those names vary by state, but it is required for the selling of almost all products and services. You may also need to obtain a Certificate of Occupancy or amend the existing one.
- Workers’ comp insurance: In most states, workers’ compensation coverage is mandatory if you have at least one employee.
Types of FSSAI Registration for Home Bakers
There are three types of FSSAI registration, i.e. FSSAI Basic Registration, FSSAI State License and FSSAI Central License. The FSSAI has categorised food business operators and the type of registration each category needs to obtain. The home bakers need to apply for FSSAI registration/license under the category of ‘Restaurant’ as per their turnover provided below:
- FSSAI Basic Registration – Home bakers with an annual turnover of less than Rs.12 lakh, need to file for the FSSAI basic registration. They should fill the Form-A to obtain the registration.
- FSSAI State License – Home bakers with an annual turnover exceeding Rs.12 lakh but below Rs.20 crore need to file for the FSSAI state license. They should fill the Form-B to obtain the license.
- FSSAI Central License – Home bakers with an annual turnover exceeding Rs.20 crore, need to file for the FSSAI central license. They should fill the Form-B to obtain the license.
FSSAI Registration Application Procedure
- Go to the FoSCoS website.
- Scroll down and click on the ‘Apply/License Registration’ option on the homepage.
- Select the state from the drop-down menu where the home baking business is established.
- Select the ‘Food Services’ option that is displayed below.
- Scroll down and select the ‘Restaurants’ option from the list.
- Select the applicable turnover and click on the ‘Proceed’ button.
- Fill in the required details on Form-A or Form-B and click on the ‘Save & Next’ button.
- Upload the necessary documents.
- Pay the FSSAI registration fees and submit the registration form.
- The FSSAI authorities will verify the registration application form and documents. They may also inspect the food premises if required.
- The FSSAI authorities will grant the FSSAI Registration Certificate if they are satisfied that the home baker meets all the required criteria. The home bakers can download the FSSAI registration certificate by logging into the FoSCoS portal.
The home bakers can also file for FSSAI registration offline by visiting the food safety commissioner or food safety officer-in-charge. They need to get the registration form, i.e. Form-A or Form-B, fill it and submit the documents to the officer-in-charge in the food safety department. The authorities will verify the application and grant the FSSAI registration.
Price Your Baked Goods to Ensure Profitability
Pricing your baked goods takes much more than simply looking at what your competitors charge and doing the same. Your baked goods must cover your costs of ingredients, labor, and additional overhead like business fees and farmers market fees, with some still left over for profit. But how do you figure out all of those numbers?
Calculate Your Food Costs
Build a spreadsheet of each ingredient that you use, plus the cost of each in common denominations. For example, you could list the costs of:
- a pound of flour
- a pound of sugar
- a dozen eggs
- a stick of butter
- a tin of baking soda
- and so on.
Then, use that information to calculate the food cost of each recipe.
Maybe you plan to sell cupcakes. Based on your spreadsheet, you can calculate the cost of the flour, sugar, baking soda, vanilla, eggs, etc. that go into your recipe for a single batch. If a dozen eggs cost $3 and you use two eggs in your recipe, you’ll know that the cost of those two eggs is $.50.
Let’s estimate that your cost per batch of cupcakes is $5.00. Then, divide that total batch cost by the number of cupcakes in a batch. For a $5.00 batch that yields 24 cupcakes, your cost per cupcake would be $0.21 $5.00/24 cupcakes = $0.21 per cupcake. Remember, this is only the cost of the ingredients required to make the goods.
Calculate Your Labor Cost
Next, assess how long it takes you to make a batch of those cupcakes. Perhaps it takes you two total hours to mix the batter, bake, decorate, and package two dozen cupcakes.
How much could you expect to be paid hourly if you worked in a bakery? Let’s say you would be paid $15 per hour. So a total batch of your cupcakes is worth $30 of your time.
Now, we can figure out the labor per cupcake. Divide the total dollar value of your time by the number of cupcakes. $30/24 cupcakes = $1.25 labor per cupcake.
Calculate Your Overhead Costs
Consider what other expenses you’ll incur for your business. This could include fixed costs like farmers market fees and a monthly website. It also includes variable fees that change based on how much you sell (like labels and packaging costs) plus cooking needs (think parchment paper and cupcake liners.)
These values can be hard to estimate before you have some experience and know approximately how many items you’ll sell per month, but do your best to estimate a total monthly overhead, and divide it by the number of items you expect to sell per month. When getting your start, you may want to under-estimate your sales so you don’t dig yourself into a hole from the get-go.
For easy math, let’s say your monthly costs are $100, and you sell 400 items per month, for an overhead cost of $0.25/item. $100 overhead/400 items = $0.25 per item.
Assess Your Cost of Goods Sold
Cost of goods sold (referred to in the industry as COGS) is the total cost of producing all the items you plan to sell. Add each of these individual costs up to get your cost of goods for a single cupcake!
In our example: $0.21 food cost + $1.25 labor cost + $0.25 overhead costs = $1.71 per cupcake.
Now you have an absolute baseline for your sales price. Anything under $1.71 and you’ll lose money on every cupcake. Anything over $1.71 and you’ll make money on every cupcake.
To get your shop’s COGS, repeat this process for each item you sell.
Get Your Equipment and Supplies
Once you know what you’ll be making, you can get what you need to execute your offerings. Whether that’s assorted cake or muffin tins, bread tins, cupcake wrappers, piping bags and tips—make sure you have everything ready to go and a place to store it all.
Some states’ cottage food laws require that you keep your bakery equipment separate from your personal kitchen equipment, so keep those extra space needs in mind. Make sure to track the cost of all of your supplies, so you can account for them when you price your menu and do your taxes.
Promote Your Home Baking Business
Showing up with baked goods ready to sell is a start. But with some marketing and promotion, you can get people excited about finding your stand at the local farmer’s market.
Ready, Set, Bake!
Bake plenty of your best treats, package them nicely, and head out to sell! Most home bakers sell their goods onsite at events like farmers markets and county fairs. Check your local and state regulations for where you can and can’t sell home-based bakery goods.
You may (depending on state regulations) also be able to sell your baked goods online. If this applies to you, a simple website can let customers place orders throughout the week that you can deliver whenever it’s convenient for them. Be sure to include a disclaimer about how far in advance customers need to place orders to ensure they’re delivered on time.
Benefits of FSSAI Registration
- The FSSAI license aids the home bakers to export baked items to foreign markets and reach international food safety and security benchmarks.
- It provides credibility, builds goodwill and helps the company gain more clients.
- It helps build a strong relationship with customers as the FSSAI registration/license assures them of the baked food’s quality, hygiene and safety.
- It enables the home bakers to carry on business without legal hassles and avoid penalties.
- It helps obtain funds quickly from investors and expand the home baking business.
- It ensures the customers that the home bakers are committed to public health and comply with the norms that ensure food safety.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
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Plan Your Bakery Menu
Once you understand the rules and regulations and have your company set up, you can start the fun part!
Many home-based bakeries make cookies, breads, muffins, cupcakes, or cakes. As your own boss, you can choose to make whatever you like best (and choose not to make anything that you don’t enjoy). Auguste Escoffier School of Culinary Arts baking and pastry student Katie Sualog makes legendary biscotti in her home-based bakery!
Make sure to keep local laws in mind while planning your menu! Remember, in most cases the end-product must be shelf-stable, so anything that requires refrigeration is usually not an option.
One of the best things about a home bakery is that they’re flexible. Let’s say you go to the farmers market one weekend to sell pre-cut slices of banana bread. You hear from a few people that they love your banana bread, and wish they could buy a whole loaf! Well that’s easy for you—next weekend, you can offer both slices and whole loaves for those who want them, versus having to stick to a predetermined menu. You can also switch things up whenever you like, experimenting with different ingredients or scaling back when things get a bit too busy.
Not sure what to bake? An education in Baking & Pastry Arts from Escoffier introduces students to many different types of baked goods. And with the online program, students can practice their techniques right in their home kitchens—perfect for the aspiring home-based baker.
Documents Required for an FSSAI Registration
- Proof of possession of home baking premises, i.e. rental agreement, sale deed, etc. It is sufficient for a home baker to provide the home address to avail of FSSAI registration. But if the home baker has a separate working space like a studio where he/she bakes the food, that address should be given as the business address.
- List of foods provided.
- Proof of possession of office address/home baking premises.
- List of foods provided.
- Proof of expected annual turnover.
- Food safety management system certificate or plan.
- Address proof and photo ID proof issued by the government authority of the authorised signatory.
- Analysis report of water used in foods from a recognised or public health laboratory to confirm the quality of drinkable water.
- Identity proof such as ration card, PAN card, passport, driving license, Aadhaar card or voter ID card.
- Food safety management system certificate or plan.
- Import/Export Code (IEC).
- Proof of possession of premises of the home baker such as electricity bill, sale deed, rent agreement, etc.
- Partnership deed for partnership firm, self-declaration for proprietorship or Memorandum and Articles of association for company.
- Panchayath license, trade license, corporation license or municipality license.
- Certificate of product approval.
- Permit from the Animal Husbandry Ministry.
- No Objection Certificate (NOC) for the quality of food and regulating compliances issued by the FSSAI authority.
Requirement of FSSAI Registration for Home Bakers
There is an increase in the number of home bakers since there has been an increase in demand for home baking products over the past few years. Thus, FSSAI made it compulsory for home bakers to obtain FSSAI registration to regulate the food safety and quality of such bakers. The home bakers will face legal issues if they do not get FSSAI registration for baking and selling food from home.
The FSSAI could impose a fine if home bakers do not obtain the registration and also ban them from continuing their food business in the future. It may also result in loss of business. Without FSSAI registration, home bakers will also not be able to sell their food online through delivery apps. Thus, all home bakers in India must obtain the FSSAI registration.