The OP's occasional cake for a coworker is not going to profit her financially.
You're right that it may not profit her financially, but regardless of profit, in our state is is against the law to sell cakes out of an unlicensed kitchen and it is virtually impossible to license a home kitchen. The exchange of money, profitable or not, is considered selling. It doesn't matter whether any of us agree with the laws or not, that fact won't change.
I know...that particular post was in reply to a post about owing taxes.... 
So...just curious....nobody ever has bake sales in your state...brownies, cookies, etc?
If it's non-profit, it's legal. The rules are crazy. You can sell unlimited baked goods IF you are a non-profit organization (not just by saying you don't profit - you have to be signed up as that kind of organization). So, a church bake sale is legal, a school bake sale, etc. But a bake sale at a garage sale is not.
I do alot of cakes for friends and family, usually always free. On occasion they will insist on giving me a gift. The ones that think they are really being generous have no idea.
My ingredients add up to let say 25.00, they'll give me a 20 to pay for ingredients. Doesn't even cover the cost of ingredients. Its amazing how they see a cake mix for a dollar and think that is all it costs.
If you are just trying to expand your portfolio, and you are having fun and learning at the same time so maybe you can open your own shop someday, I really don't see any harm. I would definitely check with your health department in your state.
So...just curious....nobody ever has bake sales in your state...brownies, cookies, etc?
I'm not sure how that works. Could it be because someone DONATES the baked goods to a non profit who then uses it as a fundraiser? I very rarely see bake sales anymore.
So...just curious....nobody ever has bake sales in your state...brownies, cookies, etc?
If it's non-profit, it's legal. The rules are crazy. You can sell unlimited baked goods IF you are a non-profit organization (not just by saying you don't profit - you have to be signed up as that kind of organization). So, a church bake sale is legal, a school bake sale, etc. But a bake sale at a garage sale is not.
Wow, that is really really crazy.... I wonder then if yeah, you could be a part of your church and sell the cakes as fundraising for the church, and then keep your costs and give the church your profits?
Oh brother.
It sounds like you are just trying to make cakes for a couple of people who knows you through a mutual friend. You don't even have to report income to the IRS unless it is $600 or more.
I could see if you were trying to sell to the public and make a business out of it. It is legal to have a hobby and it is legal to get paid for your hobby.
How would this be different from a 15 year old who gets paid for babysitting? Legally, that person isn't even old enough to work in some states.
I think you should do what you feel is right. If a friend of mine wanted to pay me to make a cake, I would do it, even for friends of friends....but not for strangers.
It sounds like you are just trying to make cakes for a couple of people who knows you through a mutual friend. You don't even have to report income to the IRS unless it is $600 or more.
I could see if you were trying to sell to the public and make a business out of it. It is legal to have a hobby and it is legal to get paid for your hobby.
How would this be different from a 15 year old who gets paid for babysitting? Legally, that person isn't even old enough to work in some states.
I think you should do what you feel is right. If a friend of mine wanted to pay me to make a cake, I would do it, even for friends of friends....but not for strangers.
That's my whole thing...people make stuff and sell on etsy all the time. I realize cake is food...on the other hand...people make cookies for coworkers all the time. Or invite coworkers to dinner...or bring dessert for the breakroom....why would a decorated cake be so bad...and so the coworker decides to pay you for your time and expenses?
I think as long as you aren't a "business" and aren't doing it all the time, that it couldn't possibly be illegal....????
In some areas it is. Don't get me wrong - I'm not telling anyone what they should or shouldn't do. But in some places, it is technically illegal to do even just a cake a month or whatever.
Again, will the HD know? Probably not. You'd have to get turned in. And that means either your co-workers, or that friend's friend at the baby shower has to do it, which isn't likely. Although, you are taking the risk, because what if that husband of the friend's sisters, uncle is there and he works for the HD? Rare chance. It exists. Do you take that chance? To each their own.
The HD catches on if they see you advertising, or if word gets back somehow. If you live in a very strict area, you have to weigh that risk, see how much you think it's worth doing the cakes anyway, and only you can know if it makes sense for you.
Either way, like I said, I'm not as scared of the HD as I am of being sued by some loser at a party who wants a quick buck and tries to say my cake poisoned them. Only way to avoid that one is via liability insurance, which requires a registered business. A party for a close friend doesn't scare me all that much, but a large wedding where I don't know most the guests, does.
So Larkin, if you baked a cake for someone's wedding and didn't charge them, are you saying you couldn't be sued if someone got sick...or claimed to get sick? (And I hope this question doesn't sound sarcastic! LOL. It isn't meant to...I'm truly curious.) Is it the exchange of money that makes you liable or the product itself?
So Larkin, if you baked a cake for someone's wedding and didn't charge them, are you saying you couldn't be sued if someone got sick...or claimed to get sick? (And I hope this question doesn't sound sarcastic! LOL. It isn't meant to...I'm truly curious.) Is it the exchange of money that makes you liable or the product itself?
I heard that if you know the person is not a business then you take the risk into your own hands when you order.....
If the person is not claiming to be a business, then how are they illegal?
For instance....if you get your tooth pulled by a friend who doesn't claim to be a dentist...and you hemorrhage....after asking him to pull the tooth...can you sue him? No...because you chose to let a friend with no business license to pull your tooth.
But if the person claimed to be a dentist but is unlicensed...and pulled the tooth...and you hemorrhaged...then you have a pretty good chance of winning a lawsuit.
kitagrl, everything you're saying makes logical sense, but I wonder if it's what the law is. Unfortunately, the law isn't always logical!
Seriously! How does someone who is trying to start their own baking business do it? You need to build a client base to make sure (or hope) you will have SOME money coming in. You can't do that unless people taste/see your cakes and become loyal to you. And you can't keep baking cakes for free for everyone or it seems they won't want to pay you when you become legal! Do you just take the leap, become legal from the start and hope for the best? I just know there are 1000s of people baking cakes in their OWN home kitchen, without permits and licenses, and selling them for profit. Once they get to a "certain" point, they go legit. Yes, they might get caught and fined (or closed), but I know it's happening on a huge scale!
Speaking of baking/selling without a license, etc:
Do unlicensed (illegal) bakers/sellers report their income to the IRS and State? I'm a licensed home baker so I report everything...
There are a few unlicensed (home) bakers in the area who have websites with prices...I only know this because when I renewed my license I asked the HD how many local home bakeries there were and I'm one of just a few in the state.
This is not a judgement, and I have no intention of turning anyone in...I honestly am just curious. Do most unlicensed sellers report their earnings or do things under the radar? Thank you.
I think that if you want to make cakes... because you love the art... you want to get experience... you don't mind NOT making money... etc etc... then yourbest bet is to work at a bakery or a cake studio... maybe on weekends... or peak times... you will be able to do just what u r saying and be in no illegal mumbo jumbo (sp?)
I also saw the news report that the IRS wants to start tracking craig's list bartering so they can "tax" the transaction somehow...
I know someone said it's not so much about tax & $$ as it is about getting sick or being sued...
But I think what kita said it's true... they can't sue you if you are not a legal baker... it's their responsability as an educated consumer to make sure they are "hiring" a licensed baker... that's how the government sees it anyways...
but I see it a little bit on both sides... I can see why they should allow a cake sale here and there... but I also see why they shouldn't... it's a tricky one...
But.... the law is what it is....
Is it fair that a father has to pay almost half his yearly salary on child support and he is UNABLE to claim that at the end of the year?!?! I don't think so.....
But
That's a fact....
so even when it's just not logic in my eyes... we must follow the law or else they make sure you pay "dearly" for doing things your way.....
Good luck and make the choice that you feel comfortable with... risky or not... it's all on you...
Kitagirl, it's not my business and I don't know if you are or not, but I'm just asking in general: if someone is unlicensed and they claim self-employed, is that a redflag to the IRS/State to find out what business they run? I know some home businesses (non-food) don't require licenses, so I don't know the answer...I think it's only honest to report your income since an audit is not a visit to the candy store... I just did my business taxes and it's shocking how much you end up spending a year to sustain a home business. It's nice to see it all in writing though.
I was told by a reputable, licensed decorator in an illegal state (MD) that she did it too...until she was ready to launch a business.
Not sayin' its right...but....
I recently read an article about a local very successful caterer and in the article it said she started her business in her apartment for a few years before moving to a commercial kitchen... and her apartment was here, same place, where it is not nor has it been legal. I then read another person's profile story in a magazine, and she had the same kind of story in a state that is also illegal. I think it's funny that they just go ahead and pretty much say they were doing it illegally at first.
I agree, catch 22, can't break in without a customer base, can't have a customer base without the legal business (legally). I'm assuming the idea is that one must invest in hopes of getting customers. And that's part of it right there - storefront bakeries do NOT want it to be easy to just sell a cake.... part of it, at least in my state, is the lobbyists who make it very difficult to get started in the business....minimize the competition and all that.
Here in Nebraska the law is you can sell cakes from home if you: 1) don't bake more than 3 days a week, 2)don't advertise, and 3)only charge for ingredients and materials used. I know a couple ladies who actually charge more than that but don't advertise so they are "under the radar" according to my health inspector. I got licensed so I could do more cakes, charge more and advertise like a mad woman! It has been well worth the money spent to just go get the license - although I am lucky in that NE licenses home kitchens if it is second, separate kitchen. Each state is different....I guess if all else, you can move to a state with more relaxed laws like ours!
Kitagirl, it's not my business and I don't know if you are or not, but I'm just asking in general: if someone is unlicensed and they claim self-employed, is that a redflag to the IRS/State to find out what business they run? I know some home businesses (non-food) don't require licenses, so I don't know the answer...I think it's only honest to report your income since an audit is not a visit to the candy store... I just did my business taxes and it's shocking how much you end up spending a year to sustain a home business. It's nice to see it all in writing though.
Hmm not sure where you are coming from here...I am licensed, insured, and report my profit in taxes each year, reporting as self-employed because that's what I am. I'm sure those without licenses do not report their profits to the IRS.
Dalis that's crazy about CL but I can see it happening! The government is so good about taxing everything 2-3 times. Most of craigslist is selling old stuff you have around the house...no reason that should be taxed...you were already taxed on the money you used to buy the stuff originally! *shaking head* Taxes keep growing and cake profits are gonna be shrinking for sure. haha.
If you don't need to make money on it and you can afford to support your own "cake fix", you can probably do what I do.
I do all of my cakes either free for charities/non-profits or for a donation to a charity/non-profit. I tell the person requesting a cake what the retail cost of it would be, they choose the charity to receive a donation in that amount, at delivery I give them a money order made out to the charity and they give me the cash equivalent. They keep the money order receipt and mail the money order to the charity.
In OH, I can bake legally from my home, but I choose to do it this way because I don't want to fuss with the rigors (accounting, mostly) of running a business.
I get to do all kinds of cakes. No one EVER argues pricing. I get marvelous thank you notes from people and charities. If I can't do a cake, I never feel guilty about shorting my business. And, best of all, I get my cake fix.
Rae
Blakes, why can't you take out your costs out of that and then donate the profits to charity?
'Cause I have to "account" for that and I can't be bothered with it. The real investment in every cake is the time, anyway. 
This way keeps the waters very "unmuddied"......
I see it as us both of us making a donation--me: the ingredients & time, them: the $$
I also feel that because the recipient realizes that I'm taking no $ at all, they're much less likely to argue with me when I tell them what the cake would sell for at retail.
Rae
If your just wanting experience to improve your skills until you can open a shop, you could donate your time and they could supply all the ingredients. Any left over flour, sugar, powdered sugar etc would be returned to the person for whom the cake was made. That way no money, gift, gratuity is exchanged they get their cake and you get your cake making fix.
Hello again :0)
I'm the one who posted about the IRS on page 2... I do not claim to be an expert and can only speak from my own experience... ya'll have brought up many interesting points and while I share the agony we all feel with regards to legalizing a home base baking business I agree with the person who said that logic is great but laws are laws & they don't care about the logic... I respect the varying points of views but here I go one more time :0)
- Donations of ingredients to bakers can be a problem if the person donating claims it on their taxes, along with the other numerous donations he/she do all yr. This becomes a problem if they are audited & discover you thru this means.. slim chance but there.
- 15 yr old baby sitters (I got one) does pay taxes, yes she does, on her investments & on her income if she has any over the yr. Problem if you do not do this... The person who pays you to baby sits claims the baby sitter on her taxes as her employee... reality probably not.. possible yes. BTW you can also pay your child to work in your business up to $600 or so I believe and then taxes set in...
- Some states/countys actually have permits in order to have bake sales and they are limited like garage sales as to how many you can have a year.. this puts you in a database...open for discovery.
- Taxes on equipment... In VA I have moved my business 3 times & each time each county does things differently... I have to pay taxes to my county on even the spatulas/paint brushes, mixers, bowls, pans, & any other item I have even if I have paid taxes on it at time of purchase and even if it's no longer of value on the resale market..if I use it for business that's enough for them...
- I also pay a litter tax yearly too! I pay the trash company and then the state to take away trash from my business :0) Love it don't you!!
Bottom line: I am not willing to risk our home, retirement, or college funds nor my husbands' job over a cake.. which is why I jump thru the hoops I do to make my business legal. Each person has to decide that for themselves and act accordingly. I pass no judgement here but offer just one bakers experience .. :0)
I will also say that I get a TB test done every 2-3 yrs and am a certified food safety manager as well all just to be on the safe side.. (BTW this comes in handy when I donate my time cooking for fundraisers :0)
& PS : while we are at it has any one considered the new VAT (value added tax) that will be coming 2011 (I believe) & as to how that will affect our businesses?? Also we are actually watching & waiting for infomation on the health care bill as well and if that affects us or not since we do not hire anyone... we hope it won't change for us but not so sure that's reality or logical :0)
Nice chatting with ya'll :0)
Here's the thing: I think a lot of home bakers would become legal if it weren't nearly impossible! You can't bake from home and sell it, so where do you bake?? There's a commercial kitchen in my town that rents for $40 per hour with an 8 hour minimum. That's $320 PER DAY! If you are just starting out on the business side - as I am - and you only have 1 cake to bake....well, do the math!
I don't want to bake for free to gain experience; I know how to decorate cakes. I want this to be my business so I can earn money. But I don't have a client base that will support paying $320 a day in rent. (I'm new to my city, so the people who I've baked for for years and know how good my cakes are don't live near me now!) I don't want to open a retail bakery, so I can't rely on walk-in sales. I can't build a 2nd kitchen onto my home. So what do I do? I would LOVE to become licensed! I want to advertise. I want to pay taxes on my earnings. I want to grow my business.
I have to believe that a lot of you on here who are licensed, started out doing jobs on the "sly." In fact, someone on this thread gave 2 examples of successful business owners who admitted to starting out illegally until they got established. I would love to hear from those of you who are licensed. How did you do it? How did you find a commercial kitchen to work out of and still make a profit? Did you become licensed before you EVER accepted money for a cake? Honestly?
Well, I'll stop ranting...LOL...but I truly would love to hear your stories, advice, suggestions, etc. Thanks!
Legal/illegal threads are very common on here. If you search it, you'll probably find lots of answers from the licensed people.
Many will tell you that a business always requires an investment and no profit in the first two years.
I think you'd find a pretty good split - those that accepted some form of payment before going legal, and those who completely followed the rules. There are definitely quite a few legal home bakers on this site, though, which is easier to get into than rental agreements or store fronts.
Honestly, I learned to decorate in Germany from a friend.... I baked for my family & practiced my buttercream skills on paper towels.. some cakes went to friends as gifts; no money no favors/donations/trades... We moved to DC and I immediately applied for & went to work on all the red tape it takes to get legal... did not bake/sell any cakes on the sly at no time whatsoever....we're military & I was afraid of POing someone & getting my DH in trouble.. During the process of said red tape I took every class I could & worked hard on said red tape requirements (it took me about 6 months w/2 little ones in tow, someone else could of done it quicker).... My 1st sale was in June 03 when I got legal.. :0)
cakemom, how did you find a commercial kitchen to work out of that didn't cost a fortune in rent and eat up any possible profit you might have made? My city absolutely will not allow you to sell food to the public that is prepared in your personal kitchen.
Oh...I did a search using the words "legal" and "illegal," but only 1 thing came up, and it only discussed how to find out if your business name is available. Maybe I don't know how to use search on here. LOL
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