How do I start a small food business from home
You want to start a food business or are about to start one, but you're not sure what kind of permit, license, or insurance you'll need. I'll show you exactly what you'll need to do depending on where you want to start your food business, and we'll get started right away. Okay, so I'm going to walk you through exactly what you'll need in terms of permissions and licenses, as well as business insurance, to get your food business up and running. This is one of the most frequently asked questions I receive, not just from my readers but also from my advising clients. By the way, if you haven't already, click that magical red button down there, subscribe, and turn on the notification bell so you can see all of the new movies that are uploaded every week. So, without further ado, let me get started. So, let me explain licenses and permits to you. So, this is something that can be a little confusing, but I'll break it down for you and offer you some helpful hints on what you might need and what you might not.
Now, the reason I say you could or might not need this is that every state is different. And, in a very quick and straightforward way, the regulations that function in each state differ substantially. This is going to be extremely dependant on where you're going to run your company. The types of licenses and insurance, as well as all of the regulations that govern those enterprises, will differ considerably depending on whether you're cooking at home or in a commercial kitchen. Now I'll give you a general idea of what to expect when you start your cottage food business. So, if you start a food business from home, you'll be labeled a cottage food business. So, what kind of permits do you require?
What kind of license do you have? Is it also necessary for me to acquire food business insurance? First and first, most states do not require you to get a business license. Now, that's a strange thing to say, and it can sound like, what do you mean? How could you create food in your house, offer it to others, and sell it without a business license? This is where you'll need to do some research and use the all-powerful Google button. Go to Google and enter in your state and, more particularly, your current location. Then write cottage food legislation into the search box. And if you want to use Los Angeles, California as an example, enter in Los Angeles, California at cottage food law. And some resources for your state will appear, and you can click on those links to learn more about them.
Most of them are state websites that will show you exactly what you need to know to get started. So, what can you expect if you start from the comfort of your own home? The following are some of the permits: They'll demand that you have a business license. In essence, you were running a business from your house. It's a food-based company, but it's still a company. Now, in some areas where it is not required by law, I would strongly advise you to incorporate as a business. The reason for this is because you want to safeguard your valuables. If you have a home and make baked goods, and you sell them at a farmer's market, and someone gets sick and sues you, you might lose your home, car, savings, and all you own. Now, if you start a business, incorporate yourself, and get food business insurance to cover the production of the food you make, you're going to set yourself up for success, because I don't want this to happen to anyone, but if it does and someone gets sick and has the potential to sue you, that's going to be a huge problem for you, okay? So get yourself incorporated and get insurance to keep yourself distinct from your business.
Now, in some areas, if you work from home, you may be on a well, and the water that comes into your home may come from a well on your property. The county will have to investigate this. Again, the county and towns operate under various ordinances that they have formed based on the regulations that they have established. These ordinances have nothing to do with the state, but rather with the municipalities and local laws that regulate home-based enterprises. So there's a distinction to be made. Make certain you comprehend this. If you're running your business from a home with well water rather than municipal water, the well water will need to be tested and analyzed. That typically costs money because it's not a free service, and if you're on a well, you'll have to pay to have it evaluated. As a result, bear that in mind. If you're on a septic tank and aren't on a well or municipal water, which are two distinct things, you'll need to get that checked out as well, because you'll be running a food company from your home. As a result, your water consumption increases. That is another permit that you may have to pay for in order to have your septic tank inspected, okay?
Now, not every state requires this, but some do, and it's known as a food handler's license or a food handler's course, and it's required 99 percent of the time. You can even take the course online these days. Now, a food handler's license is just a simple educational program that will teach you how to safely and sanitized handle food while also ensuring that you understand how it works and how to clean up after yourself. Some states have this requirement, while others do not. This is where the all-powerful Google button comes into play once more. And you'll have to check with your county, city, and state to see if they require it, okay? The second topic is company insurance, which I briefly addressed before. Again, if you're making a food product that could cause someone to become ill and sue you, you'll want to make sure you're insured by separating yourself from your business entity, as well as your personal belongings and assets. How do you go about doing that? Business insurance, business insurance, business insurance, business insurance, business insurance, business insurance, business This means that you can buy a coverage to protect the food production that takes place on your property and that you plan to sell at farmer's markets or wherever else.
Damian, how much does that set you back? A food company insurance policy might cost anywhere from $300 to $1,000 on average. However, the middle price, or median, is usually around $500 to $600 each year. Oh my God, that's a lot of money, you're probably thinking. Actually, it isn't. When you break it down over 12 months, the cost is usually a monthly payment rather than an upfront payment, and it can range from $40 to $50 each month, give or take. And even that isn't much. You could sell something for a hundred dollars at a farmer's market on a weekend and cover your entire month's worth of insurance right away. So the next step is to become a DBA (doing business as). Now, a DBA will allow you to start a business under a different name, such as Sarah's chocolates or anything similar, in order to create your company. Some states demand a DBA, while others do not. So, one again, you'll have to Google this to find out for sure if it's anything that's required. Many states do not require it any longer. You can create a business name for yourself instead of having to create a fictitious name or a DBA if you're going to incorporate as a company, okay? The next step is to obtain a resale permit.
Now, if you're going to a store and buying flour and sugar and a bunch of other baked goods, and you're going to produce a baked good item, you'll want to make sure you acquire a resale license, because it will allow you to buy ingredients in bulk and at wholesale prices, and so on. And that is something that many individuals do not consider getting. Now, most of the licenses and the things that I'm explaining to you are very inexpensive, except for when you file papers of incorporation, according to my understanding, the resale license may cost very little, if any, probably around 40 to 50 dollars. Most of the licenses and the things that I'm explaining to you are very inexpensive, except for when you file papers of incorporation. Now, if you want to incorporate yourself and your food business, which I strongly advise, it might cost anything from a few hundred dollars to three, four, or 500 dollars, okay? I'm not sure if I've ever seen it go as high as 500 or 400, but every state is different, and if you have a lawyer handle it for you and other firms involved, it may get that high. I believe the cost of incorporation was around $300. It wasn't too costly.
The last item you'll need is a sales tax certificate, which you may or may not need depending on your state's rules. It's this certificate that permits you to collect sales tax on behalf of the state if you're selling things within the state. You may file it quarterly, which means every three months, or once a year, depending on the state and how they choose to have you be categorized, okay? So you should check with your state and say, "Look, I'm not going to be collecting a lot of sales tax just now because I'm not making a lot of sales." Is it possible to do it once a year rather than every quarter? We started while we were just getting started, and we were on a quarterly timetable. We used to do it every three months, but now we've reached the stage where we sell so much that we just do it once a year and in one huge lump sum. So bear in mind that what I just said is only a subset of the permits, licenses, and other requirements that your state may impose. All you have to do now is do a little homework and double-check everything. But those are the kinds of things that will come into play when you start a home-based food business. If you're at a commercial facility, the next one is going to be.
When you get into a commercial facility, the game changes dramatically. To be honest, there are a lot of other forms of licenses and permissions, as well as inspections. To avoid having to go through all of that, you can simply rent a commercial kitchen that you don't own and use the space and equipment to make your culinary product before distributing it to the general public. When you're first starting out, I wouldn't recommend hiring a large facility or warehouse and putting up freezers, coolers, and tables unless you had around two or three hundred thousand dollars in the bank and nothing else to do with it. Even if you had that much money, if you've never run a food business before or don't know how to establish a food business in comparison to what others have done, it may be a massive waste of money. So start small, always think big, but take baby steps to see whether this is something you really want to pursue. Commercial kitchens are advantageous because they already have all of the necessary licenses and permits. Even if your state does not need it, the only thing I would recommend is that you incorporate yourself as a business.
Don't do this as a side project where you're not insuring yourself or making yourself entirely legal as a business; instead, incorporate yourself, acquire food business insurance, make sure you're insured, and then move on with your plans to develop your food products, okay? Always be on the lookout for strategies to protect yourself from the personal side of things. You don't want to lose your house and all you've worked so hard for all your life because you didn't file papers in a corporation or because you didn't acquire food business insurance because you couldn't afford it, so you hired a commercial kitchen and got into problems. So make sure you do that, and in some of the areas where I've worked, I've phoned and spoken with a few commercial kitchens to get a sense of how they operate in other states. Many of them demand that you form a corporation or be incorporated.
And you can do that with just a basic LLC; you don't have to be a C4 for escort, but that is your choice and preference; however, ensuring that you have food business insurance is something that a lot of commercial kitchens require or will request to see documentation proving that you're insured just to cover yourself is something that a lot of commercial kitchens will require or will request to see documentation proving that you're insured just to cover yourself. So, instead of, I prefer to keep my movies short and sweet and kinda make sure I compact all of this information really quickly and easily, would that be the case? So, if you liked this video and found it useful, please leave a comment down below and give me a big thumbs up. As always, if you have any questions about any of the permits or topics I addressed, please contact me as soon as possible. I hope to see you again in the next video.