Annabakescakes- Yes go figure that I didn't know. But since it has always been something I did for family I never looked into it as a business. LOL ! But I see where it been in place for two years ! And to be honest it was never covered in my mainstream media., I never saw it mention on TV, internet, etc. until I saw about it here.
You know how when you go to bed at night, one minute you're lying there wide awake and the next you're asleep? You don't really remember going to sleep, you just got there somehow. I'm not making excuses for anyone, but I believe that's what happens to hobbyist bakers. They're excited about making cakes, but it's an expensive hobby, and people start throwing money your way saying "Make my son's birthday cake!". Before they know it, they're "in business" without really knowing the hows or whys or legalities. Or even how to run a business, hence all the questions here.
I got caught in this same trap a long time ago. As soon as I realized that I was "selling" cakes I realized I needed to know more about business. I took extension classes at the local college. I quit my big-girl job and got a job at a "real" bakery where I learned a lot about baking and even more about the business side of things. I started a dialog with the local health department and announced my intentions of opening my own shop. To my surprise, she had already heard about me and was glad that I contacted her before she had to contact me. I worked with her closely as I was designing my kitchen. And this all happened before my state started its cottage food laws.
And just so we can end this post with a hearty laugh, here is a montage of some of my first cakes. You WILL get better with practice!
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Original message sent by texas_mom
I have been advised many times in these forums that what I am doing is illegal and that I should not be making cakes and under cutting the professional businesses and trivializing their craft with my cheap cakes. Thank you Jason-kraft for the links you provided concerning the cottage food law ! I had no idea this was even in the works to make us able to sell from our homes. As many of course can tell I am from Texas and I just spent a few minutes going over the cottage food law guide lines. Here in simple terms is what will become into effect next week in Texas ! So by the looks of things if I follow the guide lines and get my papers in order and my food handlers card ( which takes all of an hour ) I will be legit !!! I of course will be talking to my attorney to make sure I cross my t's and dot my i's. But this is truly exciting. [URL=http://www/texascottagefoodlaw.com/TheLaw/HB970Summary.aspx]http://www/texascottagefoodlaw.com/TheLaw/HB970Summary.aspx[/URL]
The Cottage food law in Texas has been effective since 2011. Those are just the changes/updates that take effect September 1st.
Oh, and as to my concert ticket example (something I actually did last summer), (1) at the ticket window, I made absolutely no secret of the fact that I was buying tickets for my best friend and his family, to save them any convenience charges, and get them whatever subscriber discount was applicable to that particular evening, and (2) you bet your sweet <Equus asinius> I was out to intentionally deprive Ticketmaster of their exorbitant "convenience charge" on the tickets.
As to cakes, pricing, and depriving professional baker/decorators of income: the last time I checked, this was a free country, and despite the efforts of certain groups, we still have antitrust laws, including laws against price-fixing. If a hobbyist baker, especially one who doesn't actively solicit orders, wants nothing more than reimbursement for ingredients, there's nothing wrong with that, because in most cases, that hobbyist is not going to be working at the same level as a professional custom baker/decorator, or even the same level as a baker/decorator who works for the local grocer.
At the same time, though, I would suggest that a hobbyist baking and decorating a cake for a friend or relative should (1) let that friend know what a professional would charge, and (2) if the friend in question can easily afford a professional, encourage that friend to go to a professional.
(Many years ago, when I worked part-time for an ice rink that doesn't even exist anymore, I had a local machinist make me a vandal-resistant stainless steel cover plate for a cassette deck. When I saw the price [and realized that I should have gotten an estimate first], and I recovered from the sticker-shock, I had the machinist split the billing into two separate invoices: a modest one that I'd submit for reimbursement, and a much larger one that I would quietly cover out of my own pocket, as I didn't think the rink could afford the full price, and didn't want the management to even know what it had cost, much less pay the full amount.)
As to cakes, pricing, and depriving professional baker/decorators of income: the last time I checked, this was a free country, and despite the efforts of certain groups, we still have antitrust laws, including laws against price-fixing. If a hobbyist baker, especially one who doesn't actively solicit orders, wants nothing more than reimbursement for ingredients, there's nothing wrong with that, because in most cases, that hobbyist is not going to be working at the same level as a professional custom baker/decorator, or even the same level as a baker/decorator who works for the local grocer.
At the same time, though, I would suggest that a hobbyist baking and decorating a cake for a friend or relative should (1) let that friend know what a professional would charge, and (2) if the friend in question can easily afford a professional, encourage that friend to go to a professional.
I wouldn't be trying to apply antitrust laws in this situation. Yes, they were made to protect competition, but not to protect unfair competition. One reason antitrust laws were created was because big companies would go into an area, intentionally undercut and undercharge and put mom and pop's out of business because they couldn't charge any less still survive.
That's exactly what under charging bakers are doing to those trying to make a living off of selling cake, except it's not an intentional premeditated plan to corner the market. They are selling for prices no person can survive off of as a sole income.
Do you make a living off of cakes? I doubt it. Why? Because from the posts I've seen, this concept is somehow difficult to grasp by hardly anyone whose household income doesn't completely depend on cakes to put food on the table.
Does one undercharging baker cause this problem? Of course not, but cumulatively, it's a big effect. These days everybody seems to think they should sell cakes to boost their income. Unfortunately there are no rules to make sure these folks even bother to figure out if they are working at loss.
I'm not implying anything; I'm saying it in so many words: while it would be only common courtesy for a hobbyist to encourage those who can afford a professional to go to one, for professionals to demand that hobbyists -- including those (most likely the majority) who don't have professional-level skills or equipment -- charge the prevailing professional rates to anybody, especially those who can't afford a professional, is price-fixing, plain and simple.
It would be one thing if an upstart professional cake decorator, with a large bankroll and a mean streak, were to bill at loss-leader rates, for the purpose of driving the other professionals out, and cornering the market. But we're not talking about that; we're talking about amateurs, who MIGHT SOMEDAY turn professional. And I don't know about other culinary amateurs, but if I'm doing anything in a kitchen, that somebody outside my immediate family is going to eat, then I am hyper-vigilant about anything that even looks like it might lead to foodborne illness.
I wouldn't worry about the nay sayers who are trying to make you feel bad about baking from home and getting just the costs of your cake supplies covered. You're not getting paid for your time and I'm sure you're not charging for your the gas and electric that it takes to make everything. That means you're not making a profit, if anything you're in the hole so there is nothing to report on your taxes. It's no different then going over to your friends house helping set up the party or offering to help in the kitchen with food.
What your doing is perfectly fine and necessary to get more knowledge in your craft. Your only other option would be to open your own home business or get a job as a cake decorator, even then you wouldn't be getting as much clients. As I'm coming to find out you need some amount of cake decorating knowledge to even get a job at a grocery store. I was always told you didn't need any, but even being a cake decorating instructor for 2 years makes me under qualified.
As for myself, I've learned cake decorating from my job at a craft store. They offered free classes for employees which gave me the knowledge to take over the classes once our instructor left. While doing that for two years I got a discount on all supplies bought at the store. I'm now starting to practice doing cakes for family and friends. I'm thinking about covering some of the costs including time and utilities, but I'm doing it because I do plan on doing extravagant cakes at either a upscale bakery or my own business one day. I need the experience of having people wanting me to do their ideas with my aesthetic and figuring out how to translate that into cake. It's a lot more challenging to do someone else's ideas. I'm also not worried about losing clients when I actually do open business because if you have the talent and give the same great personal experience, they will come back.
To anyone else reading this, free or low cost labor to get experience is usually a necessity, no matter what field you go into. There will always be "Professionals" that will look down and lecture you about how what your doing is bringing down the craft and industry. I would know because I've been involved in the same discussion when I was in the animation industry.
I'm not implying anything; I'm saying it in so many words: while it would be only common courtesy for a hobbyist to encourage those who can afford a professional to go to one, for professionals to demand that hobbyists -- including those (most likely the majority) who don't have professional-level skills or equipment -- charge the prevailing professional rates to anybody, especially those who can't afford a professional, is price-fixing, plain and simple.
It would be one thing if an upstart professional cake decorator, with a large bankroll and a mean streak, were to bill at loss-leader rates, for the purpose of driving the other professionals out, and cornering the market. But we're not talking about that; we're talking about amateurs, who MIGHT SOMEDAY turn professional. And I don't know about other culinary amateurs, but if I'm doing anything in a kitchen, that somebody outside my immediate family is going to eat, then I am hyper-vigilant about anything that even looks like it might lead to foodborne illness.
I can't even figure out what you're talking about. Why would a hobbyist encourage "those who can afford it" to go to a professional? And why would they go if they can get a similar cake for less money?
No one is saying that an unprofessional mess of a cake should sell for the same price as a lovely professional version of the same cake. There are plenty of people out there making high quality cakes and charging half what is appropriate. I don't care what someone wants to classify them as, if they sell a professional quality cake, then they should price accordingly.
You can argue all day long about the semantics of whether to define someone as an amateur or professional, but if they are making cakes and competing with professionals, then it's unconscionable to undercharge. And I am not conspiring to commit price fixing to suggest that they charge a price in line with what their product sells for. You seem to to not realize that these laws were created with the assumption that people want to make a profit and will naturally act in their own best interests to sell their goods for the best price they can. It's mind boggling and honestly hard to believe, but many, many people are not and it's a problem.
It sounds to me like you may not be aware of what's really happening out there or that we're addressing two different groups. Nobody cares that people make cakes for their family and a few friends. It would be silly and a bit crazy to get all up in arms over that. Do you think that's what I'm complaining about?
ATexas_Mom, sorry!! I didn't see someone had already told you lol. I was being a lazy bird and didnt read through the thread
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Original message sent by howsweet
You can argue all day long about the semantics of whether to define someone as an amateur or professional, but if they are making cakes and competing with professionals, then it's unconscionable to undercharge.
The bold part is the key. Whether or not you are competing with professionals in your local market has more to do with how you are advertised than the quality of your product. This can be a fine line, for example if you make a cake for a family member who then tells all her friends, co-workers, neighbors, etc. that they should order a cake from you for their next event, you have to be willing to turn them down (or provide the cake as a gift) if you are not set up as a business.
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Original message sent by hbquikcomjamesl
I'm not [I]implying[/I] anything; I'm saying it in so many words: while it would be only common courtesy for a hobbyist to encourage [U][B][I]those who can afford a professional[/I][/B][/U] to go to one, for professionals to demand that hobbyists -- including those (most likely the majority) who don't have professional-level skills or equipment -- charge the prevailing professional rates to anybody, [I]especially those who can't afford a professional,[/I] is price-fixing, plain and simple.
Price-fixing requires a conspiracy between major players with a large percentage of the market to set and maintain prices at a specific level. Attempting to educate new entrepreneurs about basic business principles (such as paying yourself a living wage) is not price-fixing. There is no "prevailing professional rate", but there is a pricing level in each market below which it no longer makes sense for a business to serve said market.
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Original message sent by johnfidelr
I wouldn't worry about the nay sayers who are trying to make you feel bad about baking from home and getting just the costs of your cake supplies covered. You're not getting paid for your time and I'm sure you're not charging for your the gas and electric that it takes to make everything. That means you're not making a profit, if anything you're in the hole so there is nothing to report on your taxes
It depends. If you have gross income from your hobby (such as getting paid for ingredients), you can deduct expenses for your hobby (what you paid for ingredients) only if said expenses combined with the other misc. expenses on 1040 Schedule A exceed 2% of your adjusted gross income. If these expenses do not exceed 2% AGI then you would owe tax on all gross income you receive from the hobby since you would not be able to deduct hobby expenses.
This does not hold true for a business, as there is no 2% floor restriction. If you want more specific details I recommend talking to your accountant.
Source: http://www.irs.gov/publications/p529/ar02.html#en_US_2012_publink100026974
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Original message sent by johnfidelr
What your doing is perfectly fine and necessary to get more knowledge in your craft. Your only other option would be to open your own home business or get a job as a cake decorator, even then you wouldn't be getting as much clients.
You are conveniently neglecting the option of paying for your education out of your own pocket. If you intend to start a business, the cost of learning to decorate cakes would come out of your business startup fund. If it's a hobby, you would set aside part of your personal budget to cover costs, just like any other hobby (gardening, model trains, skydiving, learning grammar, flying a plane, etc.).
I would know because I've been involved in the same discussion when I was in the animation industry.
The field of animation is about as different as you can get from cake decorating: getting started in animation requires larger capital investments, there is a relatively steep learning curve, the number of customers is very small, and the end product can be sent around the world at virtually no cost so outsourcing/offshoring is a viable option. About the only thing they have in common is that they can both be considered art.
It depends. If you have gross income from your hobby (such as getting paid for ingredients), you can deduct expenses for your hobby (what you paid for ingredients) only if said expenses combined with the other misc. expenses on 1040 Schedule A exceed 2% of your adjusted gross income. If these expenses do not exceed 2% AGI then you would owe tax on all gross income you receive from the hobby since you would not be able to deduct hobby expenses.
This does not hold true for a business, as there is no 2% floor restriction. If you want more specific details I recommend talking to your accountant.
Source:
http://www.irs.gov/publications/p529/ar02.html#en_US_2012_publink100026974
I read from the link. So someone doesn't have to report a profit from their hobby(paid supplies) if they are taking loss with the overall cost(paid supplies, time, utilities, transportation, cleaning supplies, ect.) as long as the overall cost exceeds 2% of their overall income(including actual job non-hobby related) or just the overall income of the hobby(paid supplies)?
You are conveniently neglecting the option of paying for your education out of your own pocket. If you intend to start a business, the cost of learning to decorate cakes would come out of your business startup fund. If it's a hobby, you would set aside part of your personal budget to cover costs, just like any other hobby (gardening, model trains, skydiving, learning grammar, flying a plane, etc.).
I'm not neglecting anything. As I stated previously on how I got started in cake decorating, I already know all the basics. I figured I didn't need to mention all the tools I have had to buy to actually do the hobby that I hope will turn into a career one day such as my stand mixer, spatulas, fondant tools, etc.
Also needing to pay for eduction for starting your business is an opinion, not necessary. There are plenty of people who have started their own business by working their way up from a hobby to entry level position with some paid training.
What you can't get from a class is gaining experience working with actual people. It's one thing to plan something I can clearly see in my own head, it's another to work and interpret something someone else has a rough idea of with specific guidelines, restrictions, and deadlines. Even with the basic supplies someone would still be taking a loss for the experience with the cost of time, gas to transport the cake, cleaning supplies, utilities, or any special tools that need to be fabricated to do the design like custom stencils.
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Original message sent by johnfidelr
Also needing to pay for eduction for starting your business is an opinion, not necessary. There are plenty of people who have started their own business by working their way up from a hobby to entry level position with some paid training.
And how did they fund the hobby that led to their entry level position? I'm talking about investments of both time and money here.
What you can't get from a class is gaining experience working with actual people. It's one thing to plan something I can clearly see in my own head, it's another to work and interpret something someone else has a rough idea of with specific guidelines, restrictions, and deadlines.
Agreed. This is the kind of experience you can get by doing free cakes for your close circle of friends and family, with the costs coming out of your own pocket (as one option).
And how did they fund the hobby that led to their entry level position? I'm talking about investments of both time and money here.
Agreed. This is the kind of experience you can get by doing free cakes for your close circle of friends and family, with the costs coming out of your own pocket (as one option).
Partially quoting by taking out the part of how I said someone would take a loss from other expenses. I see what you did there. ;)
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Original message sent by johnfidelr
Partially quoting by taking out the part of how I said someone would take a loss from other expenses. I see what you did there. ;)
I left it out because I didn't think it was relevant to my point. Whether you accept cash to cover ingredients or make cakes for free you will still take a loss, the only difference is the magnitude of the loss. The issue I was addressing is how you would cover that loss, and that paying for it out of pocket is an alternative to the options you presented as the only choices: opening a home business or getting a job as a cake decorator.
This list is accurate as of October 16, 2011. Here is the list of states that have Cottage Food Laws:
Arizona
Arkansas
Florida
Illinois
Indiana
Iowa
Maine
Massachusetts
Michigan
Mississippi
Missouri
New Hampshire
New Mexico
North Carolina
Ohio
Oregon
Pennsylvania
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Alabama*
Kentucky*
New Jersey*
New York*
Tennessee*
*These states have restricted Cottage Food Laws apparently these cottage food laws you guys are arguing about don't apply to everyone, but they are meant to protect the consumer. so you all may be arguing apples, automobiles, and nutcrackers for all I know.
MimiFix: It's probably got a lot of flaws, it's 2 years old from internet searching.....so you're right on. I just kept checking this thread to read the 'start up' stories from the folks, cause it's interesting to me! people are arguing about things that are so completely different in each state & country and change all the dang time. I just want to know how to bake & decorate a little better. I've been reading CC.com, and every book, dvd, internet site, tutorial, blog......et al. that I can get my hands on now that I have a high speed internet connection.
MB, that's very nice of you to share info with others. But you know how people are - they don't double check anything and then spread "the word" that they read it on CC so it must be true. For example, NJ is listed above as having a (restricted) CFL but that is not correct. NJ does not currently have a CFL. So we must be careful about posting this kind of information.
AKy's restricted cottage food law is for home processing of farm items. The short of it is, if you grow it, you can sell it. Jams from your garden, basically. IT DOES NOT APPLY TO BAKED GOODS. true story, I live here. I had close contact with the health department for 4 years, and have a commercial kitchen.
Virginia has CFL but my city does not. So someone who lives literally 10 minutes from me can bake at home while I cannot. I don't understand my city's rationale...
Virginia has CFL but my city does not. So someone who lives literally 10 minutes from me can bake at home while I cannot. I don't understand my city's rationale...
VA must do CFL county by county (or something similar) as opposed to the entire state having one blanket CFL...?
the state has a CFL law, but each city is allowed to choose what to allow in their domain. Norfolk is the only city that I know of that does not allow it. There was talk about a year or so ago about allowing it but they were going to require so much that. I guess the people gave up the fight. Figures I bought a house in the only area that does not allow it 6 months before I started doing cakes
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