I am a hobbiest who decorates cakes for family and friends to gain experience. I volunteer to make the cakes at no charge as needed. I do however know what I will charge for the cake if one is requested and do on occasion charge for special requests in an effort to support my hobby and make it possible to buy new cake pans, decorations, etc. Under these circumstances, do I need a business license, etc., as I would if I were operating a bakery? Thanks in advance for you help. Kris

Which state do you live in? If your state has a cottage food law then it should be relatively easy to get your home kitchen licensed, although you'll also need to check with your town to make sure there are no zoning issues. If your state does not have a cottage food law, you cannot legally accept any compensation for your cakes unless you have a licensed and inspected commercial kitchen -- either a second kitchen on your property, a rented commercial kitchen, or a retail shop.

I live in Kentucky and we do have a cottage food law. Thanks for the tip.

I'm in Ky, too. I was told by the county health department that I had to have a separate kitchen to be legal. I'm still a hobbyist!

There is a KY state regulation that allows home-based businesses to legally sell some types of food (including cake) at a farmer's market or roadside stand. The definition of "roadside stand" is a bit nebulous, but one could argue that a folding table at the end of your driveway would qualify. It is possible that your county has more restrictive rules than the state, in which case you would probably be out of luck, unless the county is referring to a different type of license and not the home-based processor regulation.

More info is here (about halfway down the page):
http://chfs.ky.gov/dph/info/phps/food.htm

I just dug a little deeper. We do have a cottage food law but Kentucky calls it certified home-based microprocessing. You can get your home kitchen licensed if you grow some of the ingredients used in the cake on your property - (i.e. you make a strawberry cake with strawberries you grow yourself.) This really applies just to farmers and allows them to sell their products at farmer's markets, roadside stands, etc. Bummer!!!!!

Interesting, I never noticed that distinction. You may want to contact your local state senator/representative and lobby them to propose modifying HB 391 to specifically allow the sale of homemade baked goods by non-farmers. If you spin it as generating more revenue for the state (via the annual license fee and increased income/sales tax) as well as creating new jobs at virtually no cost to the government it should be received positively.

So this begs a different question. I certainly have no intentions of doing anything illegal as I am just a hobbiest and not overly concerned about making money at this point. And if I ever get to the point that I want to do more with it then I plan to have a separate kitchen. But in the meantime, is it OK to charge for just the ingredients to make the cake and icing, cake board, cake box, etc., just to cover my expenses or is that still considered a business. Thanks.

Accepting any compensation for food (cash or barter) is considered commercial activity, even if you just break even. If you keep a very low profile, don't advertise, and only do business with family and close friends the risk is relatively low, but there is still a risk.

FYI - If you set up a legit business with a rented commercial kitchen, you are usually able to deduct any losses against other earned income on your taxes. (Some kitchens rent by the hour with minimal or no monthly fees, so you could still keep your overhead costs pretty low.) For hobbies you can only deduct expenses against the income for the hobby (in this case, $0), so you cannot use a hobby loss to offset other income.