Is This Illegal?

Business By Jessicakes831 Updated 17 Jan 2012 , 7:40pm by Bruisedapple

Jessicakes831 Posted 29 Dec 2011 , 7:36pm
post #1 of 21

I have what I call a small baking business but I'm not liscenced or certificated in anyway. I'm still a high school student so I don't really see that happening. I do like to sell cakes, cupcakes, cookies etc to my family and friends. I have a Facebook page that people can like that I often advertise on.
Am I doing anything illegal? I'm not making a huge amount of money but I don't want to get in trouble by anyone. I consider everything I sell completely edible and take the necessary measures to make sure everything is clean and sanitary.
Thanks for your time. icon_smile.gif

20 replies
CrescentMoon Posted 29 Dec 2011 , 8:02pm
post #2 of 21

In most states it is illegal to sell baked goods without a license. You need to check with your local health department to see what the rules/regulations are. I live in PA where I can have an in home bakery, under very strict guidelines. Because my family (and admitadly myslef) are quite attached to our animals, I cannot be licenesed, therefore I cannot sell cakes/cookie/pies/etc. I make them for friends and family as a way to practice my skill. If I am asked how much I charge, I say nothing. However, if my best friend happens to leave a $20 sitting on the counter as she walks out the door with her cake...I'm not going to say a word. icon_smile.gif

On the other hand, a co-worker of mine takes orders all the time for her cakes and advertises left and right. That is her business, but I am not going to put myself at risk of loosing my house over a $100 cake that someone decided they did not like and then sues me.

HTH...good luck to you!

tiggy2 Posted 29 Dec 2011 , 8:03pm
post #3 of 21

It depends on the state you live in. Is there is a cottage food law or are you required to be inspected and be licensed?

abchambers Posted 29 Dec 2011 , 8:03pm
post #4 of 21

It depends on what state you live in. A lot of states have a cottage food law that allows people to sell selected baked goods out of their home (such as cakes, pies, cookies, etc.). Unfortunately some states don't have this and require that any baked goods for sale must be produced in a commercial kitchen, or some kind of kitchen that is up to a certain code.

A good place to start would be to contact your local health dept. They can give you more information.

Also, any income you make is subject to tax. If you're not claiming any of this extra income on your taxes then that could come back to hurt you also.

Hope that helps!

shannon100 Posted 29 Dec 2011 , 8:05pm
post #5 of 21

From your FB page, it looks like you are in California. A quick search on CC popped up with this thread. http://cakecentral.com/modules.php?name=Forums&file=viewtopic&t=720295&highlight=california+cottage You may want to read through it. Based on just a few posts I read, you may be illegally selling. Every state is different, and you'll really need to research everything. Being in high school doesn't necessarily shield you from the law. You or your parents could be fined for operating an illegal food business.

costumeczar Posted 29 Dec 2011 , 8:15pm
post #6 of 21

If you're underage your parents can definitely be the ones who'd end up being fined for your activities if you're operating illegally. If you're 18 already then you'll be held responsible if someone turns you in. Chances are the health department would just tell you to stop if it's not legal to operate from home in your state, but the tax department and the IRS aren't as forgiving. In VA they just estimate how much they THINK you probably made without reporting it on your taxes, and fine you based on that. Then you'll still owe the back taxes on top of that. Even if they say that you made five times what you actually did, they'll probably not care and they'll use their estimates for their calculations.

We're not trying to be a buzzkill here, but if you have laws in your area you need to follow them. Call the health department and ask what the rules are for your state and county.

Jackie Posted 29 Dec 2011 , 8:17pm
post #7 of 21
Quote:
Originally Posted by Jessicakes831

I have what I call a small baking business but I'm not liscenced or certificated in anyway. I'm still a high school student so I don't really see that happening. I do like to sell cakes, cupcakes, cookies etc to my family and friends. I have a Facebook page that people can like that I often advertise on.
Am I doing anything illegal? I'm not making a huge amount of money but I don't want to get in trouble by anyone. I consider everything I sell completely edible and take the necessary measures to make sure everything is clean and sanitary.
Thanks for your time. icon_smile.gif




Hi JessiCakes,


FIRST: Hobby or business? Follow the laws in your area

Assuming you are in the US:
A good place to start is.. is this a hobby for you, or is the intent to turn a profit?
http://www.irs.gov/newsroom/article/0,,id=169490,00.html

The IRS considers it a business if you intend to turn a profit, so advertising on facebook about your products for sale, would seem that this is a business.

Even though you are still in high-school you would still be subject to the governing laws in your area.

You can read up on some information put together by the SBA (Thats the US Federal Small Business Association)
http://www.sba.gov/content/home-based-business

The most important thing you want to be sure of is that your local state has a cottage food law in place. Meaning you can make and sell food from home, then you will need to get a business license based on your state.

What you certainly don't want happening is someone filing a complaint against you, or having the government slap you with thousands of dollars in fines before you even graduate! (Also depnding on your age and the child-labor laws in your state, your parents/guardians my be culpable for any fines)

I think it is a wonderful idea to start a business, even if you are still in high school! I started my first business in high-school as well.

SECOND: It can be done!

We recently featured a 17-year old Rafael Logrono in Cake Central Magazine who started a cake business (with some help from his parents) I am not sure if he is in the same state as you (he is in PA), so the same rules may not apply, but it's probably worth finding out what hoops he has had to jump through. http://rafaelscakes.blogspot.com/



THIRD: You can do it!

If your state does not have a cottage food law in place, you will most likely need to prepare the food in a licensed commercial kitchen. An idea might be to get in touch with your school and see how they feel about using the kitchen while you are a student? (this is a long shot, because of liability, but still worth asking)

I will be honest with you, it is tedious and hard work to get the business "official", but it's well worth it! I know you can do it, because I did it, and others have done it, it just takes time, hard work, attention to detail.. and hey.. its a lot like decorating a cake!.

FromScratchSF Posted 29 Dec 2011 , 8:45pm
post #8 of 21

Hello Jessica!

I am so sorry to tell you, but in California it is illegal to sell food not made in a commercial kitchen. It sucks, but it is what it is. It's also illegal to have a business of any kind without having a business license. You also badly need liability insurance. This is California after all, people LOVE to sue here, even high school students!

This all sounds like a ton of work but it's really not that bad and if you are serious, you can TOTALLY do it - legally. If you want more help PM me and I'll talk you thru a few things.

Jen

PS I think your dog treats are a great idea!

Jessicakes831 Posted 29 Dec 2011 , 9:38pm
post #9 of 21

Thank you all so much for your responses!

Jackie, if I put something on my Facebook page that says I'm not working to make a profit and the money is just to cover supplies, would that be considered a hobby then? I read the link you posted but I wanted to check that that's what it meant.

I'm having trouble imagining that I can get licensed because
1. We have animals running around our house
2. We don't have money to do any remodeling and my kitchen is very outdated and I'm sure wouldnt come close to fitting the right guidelines

Thank you for all of your support and opinions!

Jessicakes831 Posted 29 Dec 2011 , 9:49pm
post #10 of 21
Quote:
Originally Posted by CrescentMoon



On the other hand, a co-worker of mine takes orders all the time for her cakes and advertises left and right. That is her business, but I am not going to put myself at risk of loosing my house over a $100 cake that someone decided they did not like and then sues me.

HTH...good luck to you!




Oh and by the way, my cakes are only for friends and family that I know so I don't think it's very likely that someone would sue me.

FromScratchSF Posted 29 Dec 2011 , 10:34pm
post #11 of 21
Quote:
Originally Posted by Jessicakes831

Thank you all so much for your responses!

Jackie, if I put something on my Facebook page that says I'm not working to make a profit and the money is just to cover supplies, would that be considered a hobby then? I read the link you posted but I wanted to check that that's what it meant.

I'm having trouble imagining that I can get licensed because
1. We have animals running around our house
2. We don't have money to do any remodeling and my kitchen is very outdated and I'm sure wouldnt come close to fitting the right guidelines

Thank you for all of your support and opinions!




I know you directed this at Jackie, but since I am in your same state and know the laws I though I'd answer. Please don't take all this the wrong way, but since you asked about the law, I have to be the bringer of bad news...

You cannot under any circumstances bake legally out of your house. Some states have laws that let them do that, California is not one of them. If you get turned in you can get massive fines and into a lot of trouble. Because you are under age it will be your parents that will be responsible for the fines.

A business license simply registers your business to pay taxes on your sales. You fill out a form and pay a small fee. There is no test or anything, you just fill out the form.

The Health Department is what certifies kitchens, and in California they will not certify a home kitchen no matter what. You have to cook and bake out of a certified commercial kitchen. There are probably several in your area that you just rent space from, but asking your school is a great idea, especially since commercial equipment is a lot different then home equipment and they might be willing to train you. Because you are under age you'll probably be required to have your own adult supervision on site at a commercial kitchen.

Advertising on Facebook is advertising that you have a business, so no, legally it is not something you are allowed to do since you do not have a legal business, even if your customers are friends and family. And to make things even more negative, you also cannot legally accept money for "just ingredients". That is still considered a sale and you are not legally allowed to sell anything unless you are a business.

I know it seems stupid especially since you are so young and only doing this to get extra money for fun, but the law here is the law.

You can keep doing what you are doing, but keep in mind that if you do get turned in or if the Health Department, IRS, or State of California get wind of what you are doing (via your facebook page), saying that you didn't know what you were doing was wrong won't get you out of the fines (and if they want to get really mean, they'll bar you from working in food service for a period of years. That means that you won't even be able to get a job at a restaurant).

Don't be discouraged, if you really want to have a business you'll want to do it the right way from the beginning!

Jackie Posted 30 Dec 2011 , 1:52am
post #12 of 21
Quote:
Originally Posted by Jessicakes831

Thank you all so much for your responses!
Jackie, if I put something on my Facebook page that says I'm not working to make a profit and the money is just to cover supplies, would that be considered a hobby then? I read the link you posted but I wanted to check that that's what it meant.



I am not sure if the IRS would consider it a hobby or a business. There is also tax filing minimum, for example if your revenue was under a certain amount for the year, you don't have to file, but these are questions best left to accountants.


Quote:
Originally Posted by Jessicakes831


I'm having trouble imagining that I can get licensed because
1. We have animals running around our house
2. We don't have money to do any remodeling and my kitchen is very outdated and I'm sure wouldnt come close to fitting the right guidelines




I don't know much about getting licensed in CA, but FromScratchSF had some good advice for you.
You can also try a search at
http://www.calgold.ca.gov/
To get a list of permits required to sell food products.


I wish you the best of luck.. and keep us posted on how things turn out for you!

IvyCakes Posted 31 Dec 2011 , 5:10am
post #13 of 21
Quote:
Originally Posted by Jackie


I am not sure if the IRS would consider it a hobby or a business. There is also tax filing minimum, for example if your revenue was under a certain amount for the year, you don't have to file, but these are questions best left to accountants.




I wanted to add onto this. I'd been thinking about it recently; I remember my mother (an accountant) telling me when I was young that you needed to make around 7k to require filing taxes (It was her way of explaining babysitters and those cute kids that mow your lawn). I looked into it and found this website: http://www.mydollarplan.com/money-file-taxes/

Of course it's for 2011, which is ending, but it seems the rates have only recently been raised so possibly they'll be the same going into 2012. From what I gather if you're self employed, regardless of being a dependent or not, you must file taxes if your net gain is more than $400.


Quote:
Quote:

Other Income Sources

There are special rules for self employment earnings and church earnings. You must file taxes if your:

Self employment net earnings are greater than $400.




As far as not being allowed to bake out of your kitchen legally... There has to be some sort of loop hole. I mean, you can bake a cake at your house and take it to a friends right? What's the difference with someone giving you ingredients to bake/decorate a cake and you doing it at home then returning it to them?

I had to read FromScratchSF post twice. >_< They covered everything, hah. It just defies common sense though. icon_sad.gif All that red-tape. What if no money changed hands period? A customer purchased everything on their own and gave them to be turned into a cake?

FromScratchSF Posted 31 Dec 2011 , 7:10am
post #14 of 21

IvyCakes, California is really strict, and how strict they are differs county by county. San Francisco is starting to really crack down, and I know counties like San Jose and LA actively looking for illegal food vendors. Bottom line? All the existing business had to jump thru mad hoops and spend tons of cash to get their doors open. No way will they let anyone get away from just cooking food out of their house. Now, will someone turn in a HS student? Will the HD throw the book at her? Who knows. I'd like to think they'd just tell her to stop and leave it at that, but who knows these days.

There are lots of people don't follow the rules and sell out of their homes anyway. Do it at your own risk, but the last thing you should do is advertise on Facebook or the internet. Keep it word of mouth and do it under radar!

For your question about a person supplying the ingredients... if your grandma drops off a bag of groceries for you to make her a cake I think that's not something the HD is going to crack down on, but if you are advertising your "business" on Facebook that you are selling X for $$, how do you explain that? Every "customer" dropped off a bag of groceries for you to make them a cake?

The joys of living in California. icon_biggrin.gif

IvyCakes Posted 31 Dec 2011 , 7:38am
post #15 of 21
Quote:
Originally Posted by FromScratchSF

IvyCakes, California is really strict, and how strict they are differs county by county. San Francisco is starting to really crack down, and I know counties like San Jose and LA actively looking for illegal food vendors. Bottom line? All the existing business had to jump thru mad hoops and spend tons of cash to get their doors open. No way will they let anyone get away from just cooking food out of their house. Now, will someone turn in a HS student? Will the HD throw the book at her? Who knows. I'd like to think they'd just tell her to stop and leave it at that, but who knows these days.

There are lots of people don't follow the rules and sell out of their homes anyway. Do it at your own risk, but the last thing you should do is advertise on Facebook or the internet. Keep it word of mouth and do it under radar!

For your question about a person supplying the ingredients... if your grandma drops off a bag of groceries for you to make her a cake I think that's not something the HD is going to crack down on, but if you are advertising your "business" on Facebook that you are selling X for $$, how do you explain that? Every "customer" dropped off a bag of groceries for you to make them a cake?

The joys of living in California. icon_biggrin.gif




Never... Ever.. Moving to California... *shudders* I salute all who live there. I wonder if Canada is as bad too... icon_sad.gif

Jessicakes831 Posted 2 Jan 2012 , 12:10am
post #16 of 21

Hi everyone.
First and foremost, I would like to say that I really appreciate that you took the time to give me your advice and lengthy words of wisdon. You have really taught me a lot and maybe even saved me from a lot of trouble.
These past few days I've put a lot of thought into what I'm going to do and I have reached my decision.
I have already edited my facebook page to say: "This is a page dedicated to the cakes I have made and the cakes I am planning to make. This is not a business, only a place to showcase my desserts." I also went through every post and every picture on the entire page and either edited or completely deleted any posts that suggested I was selling a cake or someone was ordering a cake.
A few members of my family think they may know someone that will give me access to their commercial kitchen but I'm not counting my chickens before they hatch. Right now I will just make cakes for my family and close friends, and make sure they understand that I am not legally allowed to sell cakes.
I wish the laws were easier to follow because I don't like breaking them but I don't have the resources to follow them either. Hopefully this will keep me with a happy load of caking but at the same time safe.
Again, thank you so much for your help.


P.s. I love living in California. I'm thirty minutes away from the beach, the mountains, and the redwoods. The rules just stink sometimes.

bostonterrierlady Posted 2 Jan 2012 , 12:50am
post #17 of 21

What is kind of sad is the fact that alot of ladies in their 60's and 70's now started their cake carrers working out of their homes while they were raising their kids for supplemental income. Now people cannot do this. It seems kind of sad to me.

tiggy2 Posted 6 Jan 2012 , 3:13pm
post #18 of 21

You have made the right decission and it's so refreshing to see a young person trying to do things the right way. Wishing you the best of luck following your dream.

petiterouge42 Posted 6 Jan 2012 , 4:47pm
post #19 of 21

I agree with being safe rather than sorry. I used to live in Las Vegas, and they have basically the same rules as CA- you can't make/sell anything unless it comes from a commercial kitchen. I liked baking cakes so much I moved to VA to be able to do it legally out of my home.

There are many more states that do not allow to you sell from your home than do (or require a completely separate home kitchen and serious modifications)- so it's definitely not just California that is a tough state to work with.

If you want extra practice don't forget you can always use foam dummy cakes to work on and take a picture of it for a future portfolio!

dollyandme Posted 17 Jan 2012 , 5:47pm
post #20 of 21

I know someone who makes cakes with "a suggested donation" which included the cost of supplies"...also know another, who bakes from her house and sells them to friends and family for at least 15 years. Seems to me, there are ways to go about it but one has to think about the risk.

Bruisedapple Posted 17 Jan 2012 , 7:40pm
post #21 of 21

Just in case someone from Alberta Canada wanted to know the same thing.
You can not bake or sell out of your home unless your home has a separate certified commercial kitchen, but the good news is here you can sell at the local farmers market without a health inspection and are allowed to bake and sell out of your house if you bring it to the farmers market.
OR you can list on your license address as your local church, school, community hall, or where ever they will allow you to make your cakes. a lot of churches and halls will rent the kitchen to you as they need the funding.
Hope this helps
Bruised Apple

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