Selling Cake From Your Home..... Legal?

Decorating By Bleighva Updated 26 Oct 2011 , 1:31pm by jenmat

Bleighva Posted 25 Oct 2011 , 11:09pm
post #1 of 12

I live in Colorado and unfortunatly i am not able to get my own kitchen licensed to sell cake as it is not "commercial grade", also preventing me from becoming an LLC. So is it illegal for me to sell cake out of my home at all? I was once advised to not charge for "cake" but rather to just charge a "delivery fee" to get around the laws...... Can i charge for cake or do i have to charge a "tip" or "delivery fee" to get around this? I am not big enough yet to pay to rent out a commercial kitchen that is licensed and just starting out...... Anybody out there not licensed yet still selling? What do you do? How would this work with taxes and things?

11 replies
jason_kraft Posted 25 Oct 2011 , 11:26pm
post #2 of 12

If your state does not have a cottage food law, you cannot legally sell food made at home unless your home kitchen can pass a health dept inspection. Using clever tricks like only charging for delivery is probably worse than not charging at all, since it shows that you know what you're doing is wrong and are trying to get around it.

Here is a thread about getting a CFL passed in Colorado:
http://cakecentral.com/cake-decorating-ftopict-715324-.html&sid=ad9fae8d74223317c3f492535a0049e6

kakeladi Posted 25 Oct 2011 , 11:39pm
post #3 of 12

Any time; any way/name you call it it is still *selling* when money changes hands for a product.
IF it were to go to court or the HD comes calling at your door you WILL be considered selling if you took any money for a cake OR delivery fee or whatever else you try to call it.

Yes, many of us did start sell from home before becoming legal....I did....BUT that was many yrs ago before the health laws were so strictly enforced. At one time - some 30 yrs ago(?) I put an ad in a local, throwaway paper called The Penny Pincher. Early one morning I got a call from a man who said he was HD; he told me that as far as he was concerned I could do all the cakes I wanted to as long as I did not *advertise* - word of mouth was o.k. w/him. The county HD office was some 40 miles away and he did not want to come to the mts to visit me unless they got complaints that the place was filthy or someone got sick from one of my cakes. Today I don't think they would be so lienient for sure!

Vista Posted 26 Oct 2011 , 12:01am
post #4 of 12

I tend to agree with Jason. Skirting the law is not the act of a reputable business. I know it stinks when the laws don't line up with what you want to do, but if we all only followed the laws that we agreed with could you imagine what society would look like?

Bleighva Posted 26 Oct 2011 , 12:25am
post #5 of 12

I do agree with everything you all said. I don't want to do anything "illegal". However, how can you start when you are not big enough to rent out a kitchen? Everything so far has been for family who tell me I should think about a small business on the side to being a stay at home mom. Anybody out there have any suggestions or personal stroies on how you got started when you weren't "licensed"?

jason_kraft Posted 26 Oct 2011 , 12:54am
post #6 of 12

Before we were licensed we did several months of R&D by baking at home and giving the products away (the successes anyway). I put together a business plan and found that we could make a decent wage and profit margin if we set our prices at a certain level, even including the commercial kitchen rent, so we went out and rented a kitchen. Since the kitchen rents by the hour, if we have no orders in a given week there is very little overhead (about $20/week for on-site storage), so we have a lot of flexibility to scale up or scale down. The startup costs were also pretty low, since the kitchen was already ready to go.

If the business plan indicated that we would have to price ourselves out of the mainstream market to make a profit, we would either work on lower costs (if possible) or target niche markets that will pay more. If you can't do either, then you probably shouldn't start a business until your state passes a CFL.

JaniceBest Posted 26 Oct 2011 , 12:55am
post #7 of 12
Quote:
Originally Posted by Bleighva

Anybody out there have any suggestions or personal stories on how you got started when you weren't "licensed"?




To raise money for starting out in the business, make "investment coupons" that people (friends, relatives, neighbors, coworkers) can buy from you for xxx amount. You pay them back in baked goods. Make the repayment terms clear and in the amount that you'd be able to supply. For instance, if someone buys a $100 coupon, they can redeem it after six months for their choice of any item on your current menu.

In this way you can raise enough to get started and you control terms of repayment. Good luck!

Elcee Posted 26 Oct 2011 , 1:12am
post #8 of 12
Quote:
Originally Posted by Bleighva

I do agree with everything you all said. I don't want to do anything "illegal". However, how can you start when you are not big enough to rent out a kitchen? Everything so far has been for family who tell me I should think about a small business on the side to being a stay at home mom. Anybody out there have any suggestions or personal stroies on how you got started when you weren't "licensed"?




Honestly, if you don't want to do anything illegal, and if you're not big enough to rent out a kitchen then you can't go into business. I'm in Colorado, too, and if the Cottage Food Law passes and I could license a home kitchen, then that's what I'd do. Ideally, I'd just like to do 4-6 wedding cakes per year and get paid for them.

In the meantime, my friends and family get over-the-top birthday cakes and even aquaintances get offers of wedding cakes as gifts...and I compete. It allows me to let loose creatively icon_smile.gif Check out the facebook page for the Sweet Times in the Rockies Cake show:

https://www.facebook.com/SweetTimesintheRockies

Vista Posted 26 Oct 2011 , 1:18am
post #9 of 12
Quote:
Originally Posted by Bleighva

Anybody out there have any suggestions or personal stroies on how you got started when you weren't "licensed"?




I have been caking for about 6 years now, everything has always been gifted. I only did them for friends and family (mostly my children and nieces and nephews), with no reimbursement. I never had plans to sell cakes. I have been told for years that I should, but I didn't want to. I just recently considered it a viable way to make money, when I did the research to see how to go about it I found out that my state had only recently passed a CFL.

cakegrandma Posted 26 Oct 2011 , 3:27am
post #10 of 12

I am not sure if Colorado has the Cottage Food Act or not so you would have to find that out in order to legally sell baked goods. If you take anything in exchange for your cakes, cookies or cupcakes, money, a tip or delivery charge you are doing business and it may not be legal without the Cottage Act.
evelyn

scp1127 Posted 26 Oct 2011 , 1:11pm
post #11 of 12

Barter and coupons are also considered selling. The IRS expects to be paid tax on barters, so this will not satisfy working within the law.

Because this industry is regulated for public safety, in some areas, the cost of entry is prohibitive for the small baker.

Jason has the best way, but it cannot be done without a business plan. Working out of your home allows the baker to bypass many aspects of careful business planning, but it doesn't mean that they should be ignored.

If baking and decorating are your goal in an area with strict requirements, you have no choice but to save your money and work on a plan that may take you five years to achieve. But if you don't know this already, chances are that you may not have adequate business experience. While you are saving, take classes in small business, get jobs, even part time, in the industry to gain experience, and try to get a job where you have some responsibility with the finances and employees.

Read everything you can concerning business. Have that business plan as a work-in-progress during the whole planning period.

Develop your recipes, marketing (with a strong demographic study), branding, and core business policies.

If you do these things without jumping the gun on a pricey business venture, you will put yourself in the position to possibly be one of the 15% that make it the first year vs. the 85% that fail.

Hard work? Not all fun? You bet. But if you don't have the real dedication to own a business, this may not be your best path.

If you want to succeed and actually make money for your family, this is the only way.

Another option is if your family relocates, a state where cottage food industry is available could be part of the consideration process. It can be part of the financial decision.

jenmat Posted 26 Oct 2011 , 1:31pm
post #12 of 12

Hey, most of us have been where you are.
We realize that we have a talent that we could make some money, then we have the realization that making cakes is not like making crafts, you can't just do it anywhere.
While I totally feel your pain, because of your state laws, you're going to have to come to a decision that you're all in or all out. Can't walk that tightrope very long before someone will find out.

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