OP~~What may have been deemed a fairly civil and straightforward question, "how do I price my cakes?" is actually a huge red flag to business persons who must obtain all or a significant portion of their income from "cakes". Perhaps a good way to begin to answer this question is to ask yourself one or two questions:
"How much would I need to charge to make the same take home-pay provided by a PART-TIME job (20 hours a week, for example) at McDonalds?" How much would I need to charge per cake, and how many cakes would I need to sell, to make the same net dollars generated by a part-time job in food service with no benefits such as insurance, vacation pay, sick leave, etc?
"How much would I need to charge to support my family if custom cakes were the only FULL TIME job and no one else in the household worked at a regular job?" (There is an old joke with the punchline, "Don't quit your day job!") How much would you need to charge to provide health insurance, car payments, utilities, mortgage, savings, vacation, emergencies, etc.
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Here is a superb response, dated 4/3/12, post 3 of 19 from a business person, leah_s:
(original thread link:) http://cakecentral.com/t/742057/new-cake-business-at-home-help
"Well, the first thing you need to do is check your zoning/deed restrictions/HOA covenants, etc. to make sure that you can have a biz in your home.
Second you need to contact your Dept of Health/Dept of Ag to get certified/licensed if you are in a state that permits home kitchens. You might have a Cottage Foods Law in your state - I just don't know.
Then you should get liability insurance.
Then you might want to think about setting up banking accounts, booking procedures and of course, look in incorporating. You might be able to put that off, but it's frequently fairly easy to DIY. The Secretary of State in my state actually provides forms and templates.
Next, you'll likely need to register with the state sales tax/revenue commission and ditto any local taxing authorities.
Oh, and check into getting a federal EIN. You won't need it right away,. but it's easy to do online, and you'll need it at some point.
Then of course there is the baking."
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Compliments to everyone for the civility maintained!!! Happy Holidays!