Contract And Cottage Food Law Baker

Business By careylynn Updated 25 Oct 2010 , 12:37pm by homebasedbaking

careylynn Posted 22 Oct 2010 , 5:40pm
post #1 of 16

I am in the very beginning process of starting my own business. I am currently operating under the cottage food laws of Ohio. I am trying to figure out all the details before I have 3 bridal consultations in the next month (I haven't even advertised yet, except for my FB page and I already have brides contacting me, it's caught me off guard!). I just finished writing up an event contract, and my husband brought up a good point. I've tried finding answers online and I'm coming up empty. Short of calling a lawyer, I thought someone on here would know the answer. My husband thinks because I'm not a licensed or registered business that a contract is rendered useless. That if someone wanted to challenge me and take me to court, for whatever reason, the contract wouldn't hold up since I'm not a "real" business. Is this true? Is this one of the reasons why you would become licensed and registered?

15 replies
cakesbycathy Posted 22 Oct 2010 , 6:33pm
post #2 of 16

I am also in OH but am a licensed baker.

I don't think that is true at all. You should definitely have a contract for any order, but especially wedding cakes. If anything happened and you had to go to court I think you would for sure lose if you didn't have a contract.

peg818 Posted 22 Oct 2010 , 6:33pm
post #3 of 16

I am no lawyer, but i think as long as you are legal under the cottage food laws that a contract would hold up in court because you were conducting legally. If you are outside of that food law, then you would be operating illegally and you can't have a contract for illegal activities.

jason_kraft Posted 22 Oct 2010 , 9:26pm
post #4 of 16

Is there a reason you haven't registered the business? You should be able to get a business license from your municipality for <$50/year. If you have a fictitious business name I would definitely register it, especially if the contract is between the business's name and the customer. If you use your own name on the contract this is not as big an issue.

Also don't forget about liability insurance, it is essential to protect your personal assets.

cakesbycathy Posted 22 Oct 2010 , 9:36pm
post #5 of 16

In OH it is only $10 to become licensed.
You cannot have any pets or carpeting in the kitchen and the Dept of Agriculture will come and inspect your kitchen.

GGFan Posted 22 Oct 2010 , 9:41pm
post #6 of 16

Does the contract needs to be reviewed by a lawyer or can we look up some example on line that applies to our business? Will it hold up in court if we wrote the contract ourselves? Thank you!

cakesbycathy Posted 22 Oct 2010 , 10:01pm
post #7 of 16

If you go to the CakeBoss website (the software company, not the tv show!) there is a sample one you can look at.

Yes, it will hold up in court.

scp1127 Posted 22 Oct 2010 , 10:56pm
post #8 of 16

peg818, absolutely right!

careylynn Posted 23 Oct 2010 , 1:07am
post #9 of 16

Thanks everyone for the feedback. Let me get this striaght. The $10 fee with the Ohio Dept of agriculture licenses me as a home-baker. I will be inspected and then licensed. I would still need to register my business with the secretary of state as a fictitious name, right? Which would be $50.

Jasonkraft, why is it essential to have general liability? Does most home bakers carry it?

I'm still confused as to the advantages of being licensed and registered. If I can operate under cottage food laws and be protected by a contract, what motivation do I have to be licensed and registered?

cakesbycathy Posted 23 Oct 2010 , 1:51am
post #10 of 16

For me, I became licensed because I felt it made me seem more professional. I make sure to mention that my kitchen has been inspected and that my home is both pet-free and smoke free (that's not a requirement for licensing as far as I know, I just use it as a selling point).

Some people do not want to give up their pets so they prefer to sell under cottage laws.

jason_kraft Posted 23 Oct 2010 , 3:12am
post #11 of 16
Originally Posted by careylynn

Thanks everyone for the feedback. Let me get this striaght. The $10 fee with the Ohio Dept of agriculture licenses me as a home-baker. I will be inspected and then licensed. I would still need to register my business with the secretary of state as a fictitious name, right? Which would be $50.

Correct, except (according to the web site below) the fee is $20. You are required to register your business name unless it is something like "Your Name Bakery". If you fail to register your business name, you may run into trouble if you ever need to enforce your contracts, since the business would not exist as a legal entity.


Jasonkraft, why is it essential to have general liability? Does most home bakers carry it?

Liability insurance is a necessity for just about every business, but it is especially important if you sell products that contain potentially hazardous ingredients (such as eggs and dairy) that are ingested by large numbers of people. If someone gets sick from one of your products and sues you, you could potentially be on the hook for tens of thousands of dollars (or more). If you didn't structure your business as an LLC, all your personal assets (including your home) are at risk. Even if you were not at fault, you would still have to pay thousands in legal fees.

When you take out liability insurance (which typically costs ~$400-500/year), the insurer will provide legal representation in the case of a lawsuit, and you will likely end up settling out of court with your insurer paying the settlement (assuming no ill intent on your part).

Here is an article with more information:

indydebi Posted 23 Oct 2010 , 5:59am
post #12 of 16

to add to Jason's excellent advice, liability insurance does not just cover "if someone gets sick" aspect but also covers you if someone trips (on your front doorstep, or on an extension cord at a bridal show), other food related incidents such as if there is a staple in your cake or icing (which is one reason I sift all of my ingredients!) and someone cuts their mouth or breaks a tooth on it .... or just decides to sue you because they found a staple. Anything that someone might sue for due to negligance on your part, your liability insurance will cover you. Talk to your insurance agent (assuming he is licensed for business insurance, and most are). He's the expert on this contract law coverage and will be very helpful.

Loucinda Posted 24 Oct 2010 , 12:42pm
post #13 of 16

Registering your name with the state of Ohio is $50.

LLC is $125.

Home Bakery License is $10.

Insurance - depends on who you get it with, and where you are located.

homebasedbaking Posted 24 Oct 2010 , 6:34pm
post #14 of 16

I just want to add a couple things about the legality of home-based baking.

A contract is a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law or by binding arbitration. Anytime you enter into a contract please, please have it reviewed by an attorney.

Business liability insurance protects your small business in the event of a lawsuit for personal injury or property damages. It will usually cover the damages from a lawsuit along with the legal costs. Depending on your business needs, liability insurance can be purchased in many forms. Remember however, when discussing your liability insurance needs with your insurance agent let them know that you are preparing food products, there may be specific coverage you will need or that your state will mandate. Also be aware that you are liable if there is ever a product recall on an ingredient that you use in your baked goods, discuss this with your agent and attorney.

If you are using a kitchen incubator or shared use facility make sure you have in writing what you are legally required to cover under your insurance policy and what the owners of the facility will cover, leave nothing to chance.

Starting a small business is not something to be taken lightly and you do want to dig up all the information necessary to not only make your business legitimate but protect your assets. You will also need to contact your State Internal Revenue office to learn about the taxes you are responsible for paying and if there are any special taxes for bakers, as is the case in the state of North Carolina.

It is wonderful to post to forums like this and learn from other bakers, but please go straight to the "source" for specific information since in the end you are responsible for making decisions about what is in the best interest for your new business venture.

scp1127 Posted 25 Oct 2010 , 7:30am
post #15 of 16

homebasedbaking, You are correct in the information concerning contracts, but many people not used to the business world are not familiar with the components that make up a "valid" contract. Also, lack of proper licensing could keep the OP from collecting a contracted debt in civil court, but would not protect the OP from liability in that contract... and possibly open her up to greater liability. Not for illness, but on performance, delivery, etc. The court does not require the consumer to have knowledge of legal requirements of the vendors.

To th OP, all of your answers are at the health dept and dept of ag for your state. A physical list of requirements found in the application or online will give you the info you need to be properly licensed. I don't know about your state, but the final inspection and approval should include proof of a business license. State tax and insurance are your responsibility. Also, some cities and towns use the business license to track business revenue subject to B & O taxes, which could add up if you miss this and are assessed back taxes and penalties.

homebasedbaking Posted 25 Oct 2010 , 12:37pm
post #16 of 16


You are so correct and unfortunately since there is not nationwide reg for HBB (home-based baking) every vendor is sort of left to their own devices. I guess in a perfect world it would all fall into place, but that is not the case. Thanks for sharing more in-depth info, this is much needed. We didn't even mention the new product recall requirements that will be coming down the will be interesting to see what will be expected of HBBs concerning that too!

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