Starting Out....

Business By SweetCakesbyAmy Updated 13 Apr 2011 , 11:28pm by homebasedbaking

SweetCakesbyAmy Posted 13 Apr 2011 , 2:56pm
post #1 of 11

So I have been a hobby baker for many years and lately I have been selling a few cakes to my friends and family. Everyone has encouraged me to get business cards so they can tell their friends about me.

Question is.... can I still be a hobby baker that sells an occassional cake and have business cards? Am I missing a step? Do I need to "get legal?" I never plan on owning my own business but earning a few extra bucks now and then is nice.....

I just dont want a business card to end up in the wrong hands and get a huge fine or get in tons of trouble. i just wanna bake cake.....

10 replies
leah_s Posted 13 Apr 2011 , 2:59pm
post #2 of 11

In KY yes, you need to be legal. You can't accept money for a cake with having "the paperwork" (being legal).

And yes, you don't know who will eventually see that biz card. If a HD inspector sees it, you'll get a visit. (Something similar happened to me and now I'm completely legal.)

jason_kraft Posted 13 Apr 2011 , 3:07pm
post #3 of 11

KY does allow commercial home-based baking, you need to contact the KY Dept of Health to register:

http://chfs.ky.gov/dph/info/phps/food.htm

Quote:
Quote:

Once registered, home-based processors may process whole fruit and vegetables, mixed-greens, jams, jellies, sweet sorghum syrup, preserves, fruit butter, fruit pies, cakes, cookies and bread in their farm kitchens.
...
For more information or to receive an application packet, please contact Mark Reed by phone at 502/564-7181, extension 3677 or by e-mail ([email protected]).




Don't hand out business cards until you are registered. You will also need to get business liability insurance to protect yourself.

SweetCakesbyAmy Posted 13 Apr 2011 , 3:55pm
post #4 of 11

All this sounds so intimidating....Leah_s since you are from KY--do you remember how much it cost for you to become "legal."

leah_s Posted 13 Apr 2011 , 6:50pm
post #5 of 11

That reg posted above isn't the one you'd likely fall under. KY also has definitions of "farm."

We had to remodel the kitchen before I could get a license. $$ but not $$$$

SweetCakesbyAmy Posted 13 Apr 2011 , 7:03pm
post #6 of 11

Thanks Leah_s you have been great. Looks like im going to be stepping back from making cakes rather than moving forward!

homebasedbaking Posted 13 Apr 2011 , 7:11pm
post #7 of 11

Is Your Hobby a For-Profit Endeavor?
http://www.irs.gov/irs/article/0,,id=186056,00.html
Be aware, however, when your hobby produces income, you owe tax on it.

Hobbies provide a great way to relax from the daily grind. For many people, they also offer a way to make extra spending money. Turning hobby into business means tax breaks. You can reduce your taxable hobby income by deducting your hobby expenses, but this tax break is limited.

The Internal Revenue Service defines a hobby as an activity you pursue without expecting to make a taxable profit. Basically, you do it because you like it, regardless of the cost.

But if you demonstrate that you are involved in an activity with the expectation of making money on it, the IRS will consider it a business. As such, you'll be able to deduct expenses directly from your income. You even can deduct overall business losses in the years you don't turn a profit.

You must, however, make the right moves to convince the IRS that your sideline is a legitimate business. Tread carefully.

SweetCakesbyAmy Posted 13 Apr 2011 , 7:16pm
post #8 of 11

Homebasedbakery I have only sold maybe 4-5 cakes and they were barely for profit....after today i will go back to baking for fun and not selling them.

indydebi Posted 13 Apr 2011 , 7:28pm
post #9 of 11

I might suggest that income tax and health dept regulations are two totally different things.

The IRS may allow one to may a "little" money on the side as a hobby, but does the HD allow one to sell "even one" food product that is produced in a non-health-dept regulated kitchen (assuming its a state that requires a health-dept-regulation kitchen).

Don't assume both of these govt agencies think the same way. Just because its ok for one, doesn't make it ok for the other.

Its like zoning .... a state may permit a food business in the home, but if you are in a "residential only - no business" zone, you can't do it. Regardless of what the health dept says, the zoning dept says no.

Just some other legalities to think about and check into. thumbs_up.gif

leily Posted 13 Apr 2011 , 7:41pm
post #10 of 11
Quote:
Originally Posted by indydebi

I might suggest that income tax and health dept regulations are two totally different things.




Exactly!!!! When dealing with items for humon consumption you can not automatically default to the IRS definition of hobby and business. Because your hobby also requires another dept get involved you're hobby would have to be considered a hobby by both. And the Health dept doesn't care if you're making money or not, only if you're receiving any type of compensation for your product which then consitutes a sale.

homebasedbaking Posted 13 Apr 2011 , 11:28pm
post #11 of 11

You are both absolutely correct, and as you said, "And the Health dept doesn't care if you're making money or not, only if you're receiving any type of compensation for your product which then constitutes a sale" which means in some states, not all, the collection of taxes. I know it is complicated, and every state, city, county... looks at these variables in a different manner. In a perfect world we would have a federal regulation across the board allowing home food processing of non-hazardous food products, but that would only occur in a perfect world. Thanks ladies for chiming in, your wisdom is truly appreciated.

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