Someone I know has been running a home bakery for many years in NJ, so I was surprised when I thought of starting my own and learned that it is illegal in NJ. What options do I have for running a legal baking business in NJ and what are the ramifications for running an illegal business (not planning to, just curious what this other woman is risking by doing it illegally)

Thanks for the help and inspiration

The minimum requirements for a legal baking business in most areas are:

- A commercial kitchen facility (rented or owned) that passes inspection from the local health department/dept of agriculture
- A business license (usually obtained from your town or city)
- Passing a food safety course (i.e. ServSafe)

I would highly recommend also obtaining liability insurance for your business, as well as setting up an LLC to shield your personal assets from business liability. Worker's comp coverage is also a must if you have employees working for you, even if they are unpaid interns.

By running an illegal food service business, you risk being shut down and fined by the health department. More significantly, you also face penalties and back tax bills if you have not declared business income to the IRS. And the most serious risk is if someone gets sick from something sold from an unlicensed home business. It's unlikely, but a single lawsuit could have serious financial consequences, and all your personal assets would be at risk.

how does one go about renting a commercial kitchen and what is the average cost of something like that?

You may want to try contacting your local dept of health/dept of agriculture, looking on Craigslist, or doing a google search for "commercial kitchen rental NJ" (or your local county/nearby city in place of NJ). Church kitchens might also be available in some areas, but make sure they are licensed (not all are). Most commercial kitchens require you to have at least $1M in liability insurance coverage.

Prices vary depending on location, volume, and amenities. Our current rented commercial kitchen in the SF bay area charges $21-30/hour depending on volume:
http://www.sjkitchenrental.com/rates

I know that they are supposed to send a letter first, requesting information as to whether you are running a business and you are to reply. If they believe you are still running a business they will send out a Notice of Violation and tell you that you have "x" amount of time to file the proper paperwork to obtain a permit, and warn you that if you do not comply you can be fined $1000 per day for each day they believe you are operating and not in compliance. In order to get that fine they must send you a summons and you have to appear in court and defend yourself.

Hope that helps. It's really not worth it.