How to start a bakery from home: rules, costs and where to sell

How to start a home bakery in eight steps

These steps are for a small baking business run from a home kitchen in the US, under a state cottage food law. A storefront bakery does not get that law's exemptions. In Texas, for example, the exemption from the requirements for a food service establishment covers an operation run from the operator's own home.

1. Read your state's cottage food law

   Home baking for sale is covered by a state law usually called a cottage food law. It sets which foods you may sell and what the label must say, and it may also cap yearly sales or require a permit. Find it on your state health or agriculture department's site.

2. Choose products the law allows

   Shelf-stable baked goods are the usual fit: breads, cookies, brownies, muffins and cakes without cream fillings. California allows only certain categories of non-potentially hazardous foods, which stay safe outside the fridge: its list covers baked goods without cream, custard or meat fillings, and pies are fruit pies only, with no pumpkin. Texas also allows foods that need a fridge, such as cream pies, but asks for registration with DSHS for foods that need time and temperature control for safety (TCS).

3. Register or get a permit if your state asks

   California requires registration or a permit from your local environmental health department and a cottage food operator training within three months of registering. In Texas, local health departments may not require a license, permit or fee, but the state asks for an accredited food handler course. Florida sellers need no food permit from FDACS.

4. Register the business

   Pick a structure, such as a sole proprietorship or an LLC, and get an EIN if you need one. An EIN from the IRS is free. Ask your state tax agency whether you need a seller's permit for the food you sell.

5. Make a label

   Every package needs a label, and your state's law lists what goes on it. In California that means the product's common or descriptive name, your business name, city and zip code, the words “Made in a Home Kitchen” in 12-point type on the principal display panel, the registration or permit number and the county that issued it, the ingredients in descending order by weight, the net quantity in both US (pound) and metric units, and the allergens covered in the federal rules below.

6. Cost and price each item

   Add up ingredients, packaging, the label, your time and the platform fee for one item before you set a price. Pricing by the box or the dozen spreads the packaging and fee across more items.

7. Choose where to sell

   Compare farmers markets, your own website, a marketplace and sales to local cafes. Each one charges something different on a sale, and your state may limit some of them.

8. Start with a short menu

   Sell three or four items first, note what sells out and what is left over, then add more once the first ones sell every week.

The rules for selling baked goods from home

Each state writes its own cottage food rules, so the foods allowed, the yearly sales limit, the permit, the label wording and where you may sell all change from one state to the next. Other rules can apply too: in California you need registration or a permit from your local environmental health department, and in Florida a cottage food operation must still meet the state's conditions for running a home-based business.

The table compares three states as a guide to what to look for in your own state's law.

Rules vary by state, county and city, and they change. This page is general information, not legal advice. Before you sell, confirm the rules with your state agency and your local health department.

Federal rules: FDA labels, allergens and USDA

Federal law from the FDA still shapes the label: California says cottage food products must be labeled under both state and federal rules, and Florida's law asks for allergen information as federal labeling rules specify. One federal step does not apply to a home kitchen: for FDA food facility registration, the private residence of an individual is not a facility.

Allergens matter for bakers, because flour, butter, eggs and nuts are common baking ingredients. The FDA's major food allergens are milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat and soybeans, plus sesame as the 9th major food allergen, effective January 1, 2023. The allergen labeling rules cover retail and food-service businesses that package, label and offer food.

You can name each allergen in parentheses after the ingredient, for example “flour (wheat)”. The other option is a “Contains” statement next to the ingredient list, for example “Contains wheat, milk, and soy.” For tree nuts, the law also requires naming the type of tree nut, such as almonds, pecans or walnuts. Check every ingredient you buy ready-made, such as chocolate chips or sprinkles, for allergens of its own.

A small home bakery may not need a Nutrition Facts panel. California says Nutrition Facts panels will generally not be required for cottage food, but a panel is needed if the label makes any nutrient content or health claims, such as low sugar. At the federal level, the FDA exempts retailers with annual gross sales of not more than $500,000, and retailers with annual food sales to consumers of not more than $50,000. For these retailer exemptions, no notice needs to be filed with FDA.

Meat is handled differently. USDA's Food Safety and Inspection Service covers meat, poultry and egg products, and California and Texas both keep meat out of home baking: California's list covers baked goods without cream, custard or meat fillings, and Texas excludes meat, meat products, poultry or poultry products. Check with your state before you add a meat filling to the menu.

How much does it cost to start a bakery from home

Using the example figures below, a home bakery can start for a few hundred dollars if you already own a mixer and pans. A storefront adds rent, a commercial kitchen and the permits of a regular food business.

Figures marked Example are assumptions for one small home bakery, not averages.

Example: the figures marked Example add up to $515 before any permit, plan, reader or listing fees. If you already own the equipment, they come to $215.

Where home bakers sell and what each platform keeps

Example: one $24 box of a dozen cookies, sold through each platform using its own published rates. Check that your state allows the channel before you list.

Selling at markets and online

Farmers markets and pop-ups suit a new home bakery, because buyers see the food before they buy and you are paid on the spot. Sampling rules differ: in Texas cottage food operators may give samples at any location, and in Florida free samples must be prepackaged. An in-person card payment through Square costs 2.6% + 15¢ on Square Free.

Selling online depends on your state. In California, orders taken by phone or online may be fulfilled in person, by mail or by a delivery service. Florida allows sales on your website, by mail order and in person. In Texas, one condition for an online sale is that the operator, an employee or a household member delivers the food in person. Before you list online, check whether your state lets you ship, and whether it lets you ship across state lines.

Taxes for a baking business from home

If you run the bakery yourself, check whether you owe self-employment tax, which is Social Security and Medicare taxes for people who work for themselves. The rate is 15.3%, and you must pay it when your net earnings from self-employment are $400 or more. Keep receipts for ingredients, packaging and fees, because your profit is what is left after those costs.

Cottage food rules do not lift tax rules in Florida: the state says a cottage food operation must follow all state and federal tax laws that apply to it. Whether bakery items are taxable depends on your state and sometimes on the item, so ask your state tax agency before you collect sales tax. Tax rules vary by state, and this is general information, not tax advice.

Where Nation fits

Questions about starting a home bakery