To start a home bakery in the US, you sell under your state's cottage food law, which covers shelf-stable bakes made in your home kitchen, or you move into a licensed commercial kitchen. Every state sets its own rules, so the first job is finding yours. Then: a free EIN from the IRS, a sales tax registration with your state if your bakes are taxable there, labels that declare the nine major allergens, and income tax on your profit, including 15.3 percent self-employment tax once net earnings reach $400. Whether you form an LLC is a separate decision about liability, not a requirement to sell.

The fifteen most populous states, with sales caps and what you cannot sell, are in home baking laws by state and country. The questions to ask your regulator are in do I need a license to sell cakes from home. This is general information, not legal or tax advice; check with your state agency and a tax professional before you rely on it.

Step 1: cottage food or licensed kitchen

Cottage food is the cheap, fast route, with three limits that apply in most states:

Product. Shelf-stable only: bread, cookies, brownies, most cakes with buttercream that does not need refrigeration, pies without custard. Cream cheese frosting, cheesecake, custard and cream fillings are usually out.
Customer. Direct to the person eating it. Selling to cafes or shops for resale is usually not allowed, though some states (California's Class B, Texas's registered cottage food vendors) now allow some indirect sales.
Geography and volume. Sales inside your state only, sometimes with a yearly cap: $35,000 in Washington, $50,000 in New Jersey, $150,000 in Texas, $250,000 in Florida, and $88,878 (Class A) or $177,756 (Class B) in California for 2026.

A licensed kitchen, either your own or a rented commissary or shared commercial kitchen, removes those limits but brings a retail food or food processor licence, regular inspection and rent. A common path is to start under cottage food, prove demand, and move to a commercial kitchen when you hit the cap or want wholesale accounts.

Step 2: find your state's rules

Search your state name plus "cottage food" and use the result on a .gov site. It is usually the department of agriculture, but in California, Texas, New Jersey and Illinois it is a health department. From that page, write down:

Do I register, get a permit, or do nothing?
What does it cost and how long does approval take?
Is there a sales cap?
Which products are allowed, by name?
Can I sell online, deliver, or ship, and only within the state?
What must the label say?
Is food handler or food protection manager training required?

States differ widely. Florida and Georgia require no permit at all. New York registers home processors for free. New Jersey requires a permit plus a food protection manager certificate. Texas needs registration only for foods that need refrigeration.

Step 3: check zoning and your lease

Your state's cottage food law does not override your city. The SBA notes that zoning ordinances can apply to home-based businesses, so check with your city or county planning office. Read your lease or HOA rules too. Customer pickups and signage are what usually draw complaints.

Step 4: get an EIN (free)

An Employer Identification Number from the IRS is free and issued immediately when you apply online. A sole proprietor with no employees can use a Social Security number instead, but many home bakers get an EIN anyway so they are not handing their SSN to wholesale customers, payment processors and suppliers. Ignore any website that charges for an EIN; the IRS says you never have to pay.

Step 5: sales tax

Sales tax is state law, and so is whether bakery items are taxable. Some states exempt food sold for home consumption; others tax it, or tax prepared food at a different rate. Check your state Department of Revenue for:

whether you need a seller's permit or sales tax registration
which of your products are taxable
whether your city or county adds a local rate
how often you file

Step 6: business name and structure

If you trade under a name other than your own legal name, you will usually need to register it as a DBA (doing business as) with your state, county or city. Fees and the office vary; your county clerk is a good first call.

On structure: as a sole proprietor, the SBA notes your business and personal assets are not separate, so you can be held personally liable for business debts and claims. An LLC protects personal assets in most instances. For a home baker the realistic risk is a food illness or allergy claim, and an LLC is not a substitute for product liability insurance. Many bakers start as sole proprietors and form an LLC once they take on wholesale accounts or larger events. Talk to an accountant or attorney in your state before you decide; formation fees and annual reports vary by state.

Step 7: food safety training

Many states require some training under cottage food. Texas requires an accredited food handler course. New Jersey requires a food protection manager certificate. Arizona requires a food handler card. Even where nothing is required, an accredited food handler course is short, cheap and the first thing a market organiser or customer with allergies will ask about.

Step 8: labels and allergens

Federal law names nine major food allergens: milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat, soybeans and sesame. Sesame was added from January 1, 2023, which matters if you top bread or bagels with it. The FDA allows two ways to declare them:

in parentheses after the ingredient, such as "flour (wheat)" or "butter (milk)", or
in a "Contains" statement next to the ingredient list, such as "Contains wheat, milk, eggs".

Your state's cottage food rules add their own label lines, usually your name and address and a statement that the food was made in a home kitchen. Texas, for example, requires the exact sentence "This product was produced in a private residence that is not subject to governmental licensing or inspection." Copy your state's wording exactly.

Step 9: income tax

Your bakery profit goes on Schedule C of your federal return. Two numbers matter from the start:

Self-employment tax is 15.3 percent (12.4 percent Social Security and 2.9 percent Medicare), and you file Schedule SE once net self-employment earnings are $400 or more.
Estimated tax. Sole proprietors generally pay quarterly estimated tax if they expect to owe $1,000 or more when they file.

Set aside a fixed share of every payment in a separate account from day one. Keep every receipt; ingredients, packaging, equipment and a share of mileage reduce the profit you are taxed on.

Step 10: insurance

Cottage food status does not protect you from a claim. Look at:

General and product liability: most farmers' markets, venues and wholesale buyers require a certificate naming them as additional insured.
Homeowners or renters: many policies exclude business activity at home. Ask your insurer in writing.
Commercial auto: if you deliver, check whether your personal auto policy covers business use.

Get quotes from a broker who writes food businesses; premiums vary by state, sales and product mix, so ask for at least two quotes rather than relying on a typical figure.

Step 11: price your first products

Cost every product before you post a price: ingredients at what you paid, packaging, your hours at a wage you would accept, then margin. If your state taxes bakery sales, decide whether your prices include tax and say so. Worked examples in dollars:

cakes: cake pricing calculator and cake prices by country
cookies: how to price cookies for a cookie business
bread: how to price sourdough bread

Step 12: orders and deposits

Write your order rules before the first message arrives: lead time, minimum order, deposit, balance date, cancellation and pickup or delivery window. For custom cakes, 50 percent at booking and the balance 7 to 14 days before the event is the common structure (see how much deposit for a custom cake and the cake order terms template). For cookie boxes and weekly bread, take full payment at order. Check your state's delivery rules before you offer it: Texas requires delivery by you, an employee or a household member, and Washington does not allow shipping or third-party delivery.

Your first-month checklist

Week	Do
Before week 1	State cottage food page read; product list checked against it; zoning checked
Week 1	EIN; DBA if needed; state registration or permit lodged; food handler course booked
Week 2	Sales tax registration if required; separate bank account; insurance quotes
Week 3	Labels with allergens and your state's home kitchen statement
Week 4	Prices costed; order terms written; first orders; first estimated-tax set-aside
Ongoing	Sales tracked against your state's cap; receipts kept for Schedule C

Where ibakepro fits

ibakepro is bakery management software for US bakers, from a cottage food kitchen to bakeries with staff, wholesale accounts and more than one location. You enter your state's sales tax rate once and it is added to taxable orders. It rolls the nine major allergens up from each ingredient so the label declaration is already worked out, and it takes deposits and balances in US dollars, with data kept in the United States. If you move into a licensed kitchen, Growth and Business add the temperature, cleaning and corrective action records a health inspector reads. Essentials is $17 a month, Growth $22 and Business $59, with a 14-day free trial. See payment schedules and deposits, recipe costing and allergen management.

How to start a home bakery in the US: cottage food, EIN, sales tax and your first month