Cottage Industry In Ohio

Business By sambugjoebear Updated 11 Apr 2008 , 8:22pm by smoore

sambugjoebear Posted 10 Apr 2008 , 1:35pm
post #1 of 21

I'm finally taking the plunge and going to start selling my cakes via the cottage industry method. icon_smile.gif However, I do have a few beginner questions. 1) Under the cottage industry, do I need to register? 2) Do I need to be concerned about taxes? 3) Does the pet in the home concern me?

I can't find any answers to my questions on the government website. Thanks! And wish me luck! icon_wink.gif

BTW, how did you get your home business up and running? Fliers, word-of-mouth, business cards? I'm excited to get started, but don't know what I need to do first. Any advice would be much appreciated!

20 replies
beccakelly Posted 10 Apr 2008 , 2:30pm
post #2 of 21

hey, good luck! i started with the cottage baking thing, but soon decided i needed to take this venture to the next level and now i rent my space. but i feel pretty comfortable with the cottage laws.

1) you do not have to register, you can still operate legally, but it is a good idea. that reserves your bis name. if someone came along and said that they've been using your business name longer than you, they can make you change your name. but registering means the state recognizes that as your name, and verifies the length of time you've been using it.

2) YES, you have to pay taxes! just like any other legal business you have to keep track of revenue and expenses, and fill out a schedule C at tax time, and pay the whole self employment taxes and everything.

3) you can still have pets and be legal. you can not have carpet in teh kitchen, and you can not sell "hazardous" foods (ie, foods that require refrigeration, like mousse as a cake filling or a cheesecake).

you have to label all your cakes with a list of ingredients. that includes your ingredients ingredients (ever looked at the back of a box of cake flour or buttermilk? easily 5-10 ingredients in each. if you use a cake mix, then you have to list the mixes ingredients). so, "flour, eggs, sugar, buttermilk" doesn't cut it. this is for allergy reasons, if the mix you use has trace amounts of nut, then the customer has to be aware of it. its easiest to make these on your computer in advance (one for each recipe/flavor), then just print it up as you bake and stick it to the box. i do weddings/large party events exclusively, and of course these don't come in boxes. so i asked, and they said that i could write a list and give it to the bride. as long as the purchaser is made aware of ingredients in writing.

i knew that weddings is where the money is in cakes, and i'm very serious about my career in this industry. i started with an ad on the knot, and it took off. slowly word of mouth has been building up, i have other vendor contacts (and make sure they are cake vendors!) so if my friends with cake businesses are booked for a certain weekend and i'm not, they'll refer their requests to me. and of course satisfied brides start referring their friends to me to.

Erdica Posted 10 Apr 2008 , 2:30pm
post #3 of 21

Congrats on taking the plunge!!!

There are a lot of posts about rules for Ohio if you do a search.

It's always wise to register your name with the Secretary of State. That goes for any state. I believe it's like $50 for 5 years or something. Not sure.

I would check with an accountant in your area about taxes. Where I am, I don't have to charge tax if I am operating out of my home and using one oven. If I had a dual oven, then I would. Weird...but it's the law.

As far as pets....that's a gray area. From what I understand, Ohio has the cottage law because of how many Amish are in the State. And they often have pets in the home that they bake goods to sell to the public. But some people have called to get clarification on this and some got "It's ok" and some have got "It's not ok for pets".

It's also best to check your local zoning laws to make sure they are going to allow you to operate out of your home. The state does but some cities don't allow it.

As far as advertising, there are a lot of posts on that too. Some good places to start out at doctors offices, schools, banks...any local businesses.

Good luck!!!

beccakelly Posted 10 Apr 2008 , 2:43pm
post #4 of 21
Quote:
Originally Posted by Erdica


I would check with an accountant in your area about taxes. Where I am, I don't have to charge tax if I am operating out of my home and using one oven. If I had a dual oven, then I would. Weird...but it's the law.




interesting, who did you talk to? with the whole sales tax thing, i called the hamilton county auditors office (i have a vendors license adn they are the office that issues it) and asked about charging sales tax on cakes. they told me no, that it was food so i didn't have to charge sales tax. i do have to charge sales tax on delivery fees, rental fees (i rent out my silver cake stand) and selling cake toppers (i sell toppers the i get from my whole sale supplier). i was clear when i told them i rent a commercial space with commercial ovens and mixers (multiple of each) and they still said "no".

Erdica Posted 10 Apr 2008 , 2:49pm
post #5 of 21
Quote:
Originally Posted by beccakelly

Quote:
Originally Posted by Erdica


I would check with an accountant in your area about taxes. Where I am, I don't have to charge tax if I am operating out of my home and using one oven. If I had a dual oven, then I would. Weird...but it's the law.



interesting, who did you talk to? with the whole sales tax thing, i called the hamilton county auditors office (i have a vendors license adn they are the office that issues it) and asked about charging sales tax on cakes. they told me no, that it was food so i didn't have to charge sales tax. i do have to charge sales tax on delivery fees, rental fees (i rent out my silver cake stand) and selling cake toppers (i sell toppers the i get from my whole sale supplier). i was clear when i told them i rent a commercial space with commercial ovens and mixers (multiple of each) and they still said "no".




I think you do because you rent a kitchen right? I asked my accountant (who works for a large accounting firm) and she told me since I operate out of my home and use a single oven that I do not have to charge sales tax. But if I start baking outside of my home or get dual oven, then things change. I think that might be where the difference is. I'll shoot her an email and ask if you want. She's cool. She may not get back to me till after April 15th though. LOL.

Edited to say: I can understand the tax on toppers and renting out stands. I don't do either of those. I'm also in a different county then you. So that might be the difference too. Not sure...

beccakelly Posted 10 Apr 2008 , 2:55pm
post #6 of 21

but thats what i mean, i DON'T have to charge sales tax. when i talked to the county auditor's office i told them i do this outside of the home, in a commercial space and they said it didn't matter, that cake was a food item so it was not subject to sales tax.

it must be because you are in a different county.

tippyad Posted 10 Apr 2008 , 3:00pm
post #7 of 21

Anyone know of other states that allow the Cottage Industry Method? Is there a website that gives a list?

Erdica Posted 10 Apr 2008 , 3:31pm
post #8 of 21
Quote:
Originally Posted by tippyad

Anyone know of other states that allow the Cottage Industry Method? Is there a website that gives a list?




There is a sticky about what states allow at the top of the business forum.

http://forum.cakecentral.com/cake-decorating-ftopict-32550.html

aswartzw Posted 10 Apr 2008 , 3:32pm
post #9 of 21

I'm glad this topic came up! I'm also wondering the same thing. As a beginner, I have never done anything worth charging before but am interested in doing so. My church has also expressed interest in this. I can understand the food tax thing. If you've ever noticed, restaurants don't charge sales tax for outside food (only beverages). They only charge for eat-in because you are using their property.

I have tons of questions regarding buttercream and fillings though. I like to use SMBC but I'm afraid I can't use it because of the cooking rule and refrigeration. Can I even use butter in my buttercream at all? I'm sure I can't use dairy which means probably no cream cheese either. This is really where the majority of my questions lie.

Erdica Posted 10 Apr 2008 , 3:42pm
post #10 of 21
Quote:
Originally Posted by aswartzw

I'm glad this topic came up! I'm also wondering the same thing. As a beginner, I have never done anything worth charging before but am interested in doing so. My church has also expressed interest in this. I can understand the food tax thing. If you've ever noticed, restaurants don't charge sales tax for outside food (only beverages). They only charge for eat-in because you are using their property.

I have tons of questions regarding buttercream and fillings though. I like to use SMBC but I'm afraid I can't use it because of the cooking rule and refrigeration. Can I even use butter in my buttercream at all? I'm sure I can't use dairy which means probably no cream cheese either. This is really where the majority of my questions lie.




From what I understand, if it could perish, then you can't sell it out of your home in Ohio. That means no dairy, cheese cake, etc. I'm not sure if that changes if you get a license or not. Becca, do you know?

beccakelly Posted 10 Apr 2008 , 3:49pm
post #11 of 21
Quote:
Originally Posted by aswartzw

If you've ever noticed, restaurants don't charge sales tax for outside food (only beverages). They only charge for eat-in because you are using their property.




good point!


Quote:
Originally Posted by aswartzw


I have tons of questions regarding buttercream and fillings though. I like to use SMBC but I'm afraid I can't use it because of the cooking rule and refrigeration. Can I even use butter in my buttercream at all? I'm sure I can't use dairy which means probably no cream cheese either. This is really where the majority of my questions lie.





youre fine with butter/milk in your buttercream. the sugar acts as a preservative, which is why you don't have to refrigerate BC unless you are keeping it around for weeks. its like a jam or jelly, such high sugar content it will be fine on the counter for days. the reason you would put it in the fridge is because if you keep it around for weeks eventually it will mold. if your cream cheese bc recipe is shelf stable its fine too. the problem would be with products that have to go back in the fridge after just a few hours (mousse, cheesecake, etc)

now, my understanding of SMBC and IMBC is that they too are shelf stable for 1-3 days. the recipes i've seen (food network, WBH, etc) all list that it is okay at room temp for a few days. that would indicate to me that you can use it. if you want an official clarification, call the health dept.

beccakelly Posted 10 Apr 2008 , 3:56pm
post #12 of 21
Quote:
Originally Posted by Erdica



From what I understand, if it could perish, then you can't sell it out of your home in Ohio. That means no dairy, cheese cake, etc. I'm not sure if that changes if you get a license or not. Becca, do you know?




once you are licensed you can sell the "hazadous" foods legally. if you don't have pets, i suggest getting a home inspection to get a license, so you don't have to worry about it. its only about $10.00. i never got a home license (pets) so i'm not sure what it entails. and my home is my apartment, so its really not feasible to try to do 2-4 wedding cakes each week in an apartment kitchen.

oh and it is a good point to check the zoning and local laws. the city of cincinnati will not allow home baking, even though the state will. its crazy, but if you live with in cincinnati city limits (thankfully i don't) they will shut you down for cottage baking, even though the state doesn't care. so when i started, i called my township and verified that it was okay. they said it was fine, but had some rules of theirs that i had to follow (no loud machinery, no employees, can't have heavy traffic, etc. nothing i couldn't follow). so make sure you check with local authorities too. (include HOA if you have one)

smoore Posted 10 Apr 2008 , 4:09pm
post #13 of 21
Quote:
Originally Posted by Erdica

Quote:
Originally Posted by aswartzw

I'm glad this topic came up! I'm also wondering the same thing. As a beginner, I have never done anything worth charging before but am interested in doing so. My church has also expressed interest in this. I can understand the food tax thing. If you've ever noticed, restaurants don't charge sales tax for outside food (only beverages). They only charge for eat-in because you are using their property.

I have tons of questions regarding buttercream and fillings though. I like to use SMBC but I'm afraid I can't use it because of the cooking rule and refrigeration. Can I even use butter in my buttercream at all? I'm sure I can't use dairy which means probably no cream cheese either. This is really where the majority of my questions lie.



From what I understand, if it could perish, then you can't sell it out of your home in Ohio. That means no dairy, cheese cake, etc. I'm not sure if that changes if you get a license or not. Becca, do you know?




You're right ... as long as it's not considered hazardous/perishable and requires refrigeration, than you can use it. Buttercream, made with butter and milk even, is ok -- The sugar stabalizes it so that it doesn't require refrigeration. Your fillings also need to be non-perishable. There are plenty of fillings that don't require refrigeration, but I'd stear clear of pudding fillings, cheese cake fillings, or fillings that are whipped cream based. Food is non-taxable, so I ensure all my toppers are edible. icon_smile.gif

aswartzw Posted 10 Apr 2008 , 4:13pm
post #14 of 21
Quote:
Originally Posted by smoore

Food is non-taxable, so I ensure all my toppers are edible. icon_smile.gif





I love it!!!!

Thanks you guys for all your help! thumbs_up.gif

MichelleM77 Posted 10 Apr 2008 , 5:21pm
post #15 of 21

Food is non-taxable (unless they are consuming it in a sit-down type bakery situation) no matter how many ovens you have.

I'm starting small. I've been doing cookies for a year and now I'm starting to branch out...first with other dessert items like cake truffles and chocolate-covered Oreos, and then small party cakes after we get moved into our house and settled. I'm sure the money is in weddings, but I'm too scared right now to touch that area!

I am planning to register my business name once we move and settle too. Can you imagine if someone took your name and started using it as their own? Yikes!

adonisthegreek1 Posted 10 Apr 2008 , 5:43pm
post #16 of 21
sambugjoebear Posted 10 Apr 2008 , 5:55pm
post #17 of 21

I've used that site already Adonis but couldn't find the answers to my questions.

Thanks Becca and Erdica for the replies. Very helpful! And that is kinda strange that the state will let you and some cities won't. Hmm...

Now, for a name. Ha! lol

I've already looked for these names on the register list for Ohio and couldnt' find them. I'm just playing around right now, but if you have any suggestions, I'll take them!

Possible Names:

Cakes by Sam
Tres Chic Cakes & Sweets
Sweet Confections
Sweetheart Bakery
Sam's Sweet Shop
Layers of Love
Duvie's Delights (married name is DuVernay and Duvie is a nickname for the original family members)

MichelleM77 Posted 10 Apr 2008 , 6:13pm
post #18 of 21

Your first two questions were about taxes and financial concerns, which you won't find on the DOA website. You will probably find those answers here: http://tax.ohio.gov/channels/other/business.stm

Your third question sounds more like a personal question as to whether animals in the home bother you. It is legal under the cottage laws.

beccakelly Posted 11 Apr 2008 , 6:09pm
post #19 of 21
Quote:
Originally Posted by sambugjoebear



Possible Names:

Cakes by Sam
Tres Chic Cakes & Sweets
Sweet Confections
Sweetheart Bakery
Sam's Sweet Shop
Layers of Love
Duvie's Delights (married name is DuVernay and Duvie is a nickname for the original family members)




i like sam's sweet shop. i'd stay away from cakes by sam, there's a well known cake business in Arkansas named that, and they do online retail sales to all over the world. once you get into online sales, you don't want anyone in the country using your same name. i'm pretty sure the laws back that up, but i'm no expert.

i also like sweet heart bakery. layers of love, and sweet confections both seem too generic to me.

adonisthegreek1 Posted 11 Apr 2008 , 8:01pm
post #20 of 21
Quote:
Originally Posted by sambugjoebear

... 3) Does the pet in the home concern me?...




According to the link I provided it does say" No pets in the home and no carpet in the kitchen.

smoore Posted 11 Apr 2008 , 8:22pm
post #21 of 21
Quote:
Originally Posted by adonisthegreek1

Quote:
Originally Posted by sambugjoebear

... 3) Does the pet in the home concern me?...



According to the link I provided it does say" No pets in the home and no carpet in the kitchen.




The no pets and no carpet is for a licensed home baker (thus the column for the amount of the license), not cottage foods. The only requirement with cottage foods (besides the non perishable foods, labeling and reporting your income - not sales tax - is that you bake in a single oven (not a commercial oven) that is also used for your daily family baking. You don't have a separate kitchen that you bake/decorate in. It truly is a home based business in every sense of the word. Here's a link with more information. http://www.ohioagriculture.gov/pubs/divs/food/curr/cottage/food-cottageindex.stm

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