A local bakery has asked me to sub-contract my cakes through them. Does anyone have any idea on how much I should charge for commission? Maybe some advice?

Will you be making the cakes based on orders taken by the local bakery, or will you be the one taking the orders and having the local bakery make them?

The bakery will be getting the orders and then have me bake and decorate the cakes.

Then you should charge whatever you would have charged if you had gotten the order directly: ingredients + labor + per-order overhead + profit (typically 20-30%).

I'd need more information to answer this. What's in it for you? More orders? Will the bakery be taking all the credit? Or will these be "Cakes by Melanie" for example. Are your cake creations unique? If so, don't you want to receive recognition as well as $$ ?

How about liability? Are you working out of a licensed home kitchen? Don't know what state you're in or the laws there. What if your cakes are mishandled by the bakery not refrigerated when they should have been, or contaminated in some way... do you see where I'm going? I guess I would weigh the bad against the good. I think the price you sell your cakes for depends upon so many factors... can you tell us more?

Startip brings up some very good points, and the contract between you and the bakery should be very clear about who has responsibility and accountability for what.

My HD doesn't allow me to "wholesale" my cakes or sell them to a bakery or restaurant for resale purposes.

You may want to check on what if any restrictions your business license has.

Will you be baking and decorating in their facility? (If so, who pays the utilities for the oven time, lights, and power?)

Who will be responsible for deliveries?

Subcontractors typically use their own tools, supplies, and equipment, set their own hours, can pick and choose which jobs to accept or turn down, and are responsible for claiming their own wages and paying their own income taxes.

These are several things to considerhope it helps.

That seems odd that a bakery wants to buy your cakes... I mean, I make regular wedding cakes for a venue, but its because they do not have someone on site that does cakes. They pay me directly, but they still allow me to use my own name and the bride knows that the venue gets the cake from an outside baker.

Why does the bakery want you to make their cakes? Do you have skills they don't have on staff? You should only contract for someone for whom you will be well compensated...often companies think they will get a cheap deal if they get a home baker or something.

For my venue, I charge my regular price. The only thing I've recently done is waived the delivery fee...after all, they do all the work with the brides so that helps me a lot.

The bakery will be providing the kitchen and supplies. Neither of us knows what we are doing. The owner of the bakery does not do custom cakes but wants to because he has received interest from other customers. The owner knows me and knows that I make cakes and wants me to do their cakes for them. Kitagrl does the venue provide the kitchen and materials or do you provide them? I know I will be getting more orders this way and would like some recognition. They will be my designs. Also I live in California. Maybe subcontract is the wrong word??? LOL I obviously don't know what I am doing

That definitely sounds like an employee situation. If he doesn't want to hire you as an employee, he could pay you as-needed as a contractor, and you would ideally be paid by the hour. Cake decorators typically start at $10-15/hour depending on location.

As an employee or contractor using the bakery's equipment you probably won't get recognition for the cakes, as they would likely be sold under the bakery's brand (unless you negotiate for that in the contract).

If you do end up working there you should make sure the owner has liability insurance and worker's comp coverage. It's also a red flag that you say no one knows what they are doing, so you may want to try to find someone who can advise you on the business side of things to make sure you both are following the rules, especially when it comes to taxes (payroll can be complicated). An organization called SCORE offers free business advice in many areas.

Watch carefully what Unlimited wrote. It is definitely a case of employee, not subcontractor. Go to irs.gov for guidelines for independent contractors. This does not fit the guidelines. In this economy, this situation is happening more and it is a red flag for an audit. The fines are added income for the IRS and you will most likely get audited. The good news for you is that the employer is the one with the liability, even if you sign the 10 something to get a 1099.

I used this system in my construction company, had it reviewed by an IRS prosecutor (while I was a witness in a tax fraud case), and used it correctly. I have it set up as my system for extra help in my bakery, but beware, you must follow every requirement. Contracts, no daily activities (answering the phone), you own equipment, your own hours, your own methods (not theirs), no reimbursement (gas, broken KA, etc.). You must meet the criteria that you can lose money, just as any independent business. A separate license (business) is also required if needed by your area.

In this situation, selling your cakes on your schedule through the shop would work. But making their cakes on their schedule will not. Think of a situation where your house gets a plumbing leak. The contracted plumber comes if he is available, uses his tools, and does the repair his way. You pay for the completed job. He has his own license and insurance and he is responsible for his own expenses and taxes. If he is in an auto wreck or hurts himself on the job, you are not responsible. If he does a bad job, you can sue him (just as liability for the baking will be your responsibility).

This person can pay you "piece work" and still pay your taxes, which is what you all are really looking at. In my construction company, I had two types of employees, independent contractors (my foremen), and piece workers, the employees. On the employees, I paid all taxes, and held a WC policy. I was not required to have unemployment insurance on them, as it was "by the job", even though they all had over 40 hours.

This is a simplified version without all of the details. Before you enter into this agreement, stop by your local IRS office for a review. Or have a CPA or tax attorney check it. The IRS office is free.