To start a treat business, you need to choose a legal structure, register with your state, work within your state’s cottage food law, meet federal labeling requirements, secure any required permits and insurance, and set yourself up to pay self-employment taxes. The specifics shift from state to state, but the framework is the same across the country. Getting these pieces right at the beginning is what separates the home bakers who grow into steady businesses from the ones who get shut down by a neighbor complaint or a labeling violation.
Choose a Business Structure
Most treat businesses begin as either a sole proprietorship or a limited liability company. A sole proprietorship is the default. You don’t file anything to create one; you just start selling. It costs nothing, but your personal bank account, car, and home are exposed if a customer gets sick or sues.
An LLC puts a legal wall between the business and your personal assets. Formation fees run roughly $35 to $500 depending on the state, and you file articles of organization through your Secretary of State’s office. You’ll name a registered agent, the person authorized to accept legal paperwork for the business, and describe what the company does. Before you commit to a business name, search your Secretary of State’s online database to confirm nobody else is using it. A duplicate gets your filing rejected, and finding out someone else owns the trademark after you’ve printed labels is expensive.
Get an Employer Identification Number
An Employer Identification Number is a federal tax ID from the IRS. You need one if you form an LLC, hire employees, or pay excise taxes.1Internal Revenue Service. Get an Employer Identification Number A sole proprietor with no employees can use a Social Security number instead, but most banks require an EIN to open a business checking account, and handing out your SSN on vendor forms invites identity theft. The application is free and takes about ten minutes online.2Internal Revenue Service. Employer Identification Number
Work Within Your State’s Cottage Food Law
Every state has a cottage food law that lets people produce certain foods in a home kitchen and sell them without a full commercial license. The details vary sharply, but the common thread is that you’re limited to shelf-stable items that don’t need refrigeration to stay safe. Cookies, brownies, fruit pies, candies, jams, and dried pasta usually qualify. Cream-filled pastries, cheesecakes, and other foods that require temperature control usually don’t.
Most states also cap how much you can earn under cottage food rules. Limits commonly fall between $15,000 and $50,000 per year, though a few states set no cap at all. Going over your state’s ceiling means you have to move into a licensed commercial kitchen. Your state’s department of agriculture or health department website will have the exact figure. Guessing here can trigger fines or a cease-and-desist.
Zoning and Your Physical Space
Cottage food laws tell you what you can make. Zoning tells you whether you can make it where you live. Many residential zoning codes restrict or prohibit manufacturing, retail sales, or commercial food production on residential property. Some municipalities require a home occupation permit or conditional use approval. Plenty of cottage food sellers never hear a word about zoning, but a single neighbor complaint is enough to trigger an inspection. Call your local planning or zoning office before you spend money on equipment.
Some health departments also expect your workspace to be separated from household activity and pets. Whether you need to submit a floor plan, a water-quality test, or just a signed affidavit depends on the state. Treat your local health department’s site as the checklist.
Ingredients You Cannot Use
Federal law prohibits adding CBD or THC to food sold in interstate commerce, regardless of your state’s cannabis laws.3U.S. Food and Drug Administration. FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD) Hemp seed oil, hulled hemp seeds, and hemp seed protein powder are exceptions because they contain only trace amounts and have been recognized as safe for use in baked goods. CBD-infused brownies and similar products remain illegal to sell under federal food law even where state cottage food rules are silent on the subject. Some states add their own prohibitions on alcohol-infused goods or products that require commercial-grade processing.
Know Where You Can Sell
Cottage food operations are almost universally restricted to direct-to-consumer sales. That means farmers markets, craft fairs, your front door, and in many states your own website. Wholesale arrangements, meaning selling to grocery stores, coffee shops, or restaurants for resale, are typically prohibited unless you hold a commercial food license. The trade-off is straightforward: cottage food laws relax safety inspections in exchange for limiting your reach.
Interstate sales are another hard line. Because cottage food laws are state-level exemptions, they generally don’t extend across state borders. Shipping cookies to a customer in another state can trigger federal jurisdiction and FDA facility registration requirements that cottage food operators are specifically built to avoid. Selling nationally or wholesale means a licensed commercial kitchen and, potentially, FDA registration, which is a fundamentally different operation.
Label Every Product Correctly
Federal law treats a food as misbranded if the label is missing required information, and selling misbranded food is illegal even at a farmers market.4Office of the Law Revision Counsel. 21 USC 343 – Misbranded Food At minimum, every package needs the product’s common name on the front (for example, “Chocolate Chip Cookie” or “Lemon Curd”), the net quantity by weight or count in both metric and U.S. customary units for most products, an ingredient list running from heaviest to lightest by weight, allergen disclosure for any of the nine major food allergens present, and the name and address of the manufacturer, packer, or distributor.
The FDA’s labeling guide spells out formatting rules, including type size and placement for the statement of identity and net quantity.5Food and Drug Administration. Food Labeling Guide Most states also require cottage food labels to carry a statement along the lines of “Made in a home kitchen not inspected by [state agency].” The exact wording is in your state’s cottage food statute.
The Nine Major Allergens
Federal law requires you to clearly identify any of the nine major food allergens in your product: milk, eggs, peanuts, tree nuts, wheat, soybeans, fish, crustacean shellfish, and sesame.6U.S. Food and Drug Administration. The FASTER Act – Sesame Is the Ninth Major Food Allergen Sesame was added under the FASTER Act, effective January 1, 2023. You can meet the requirement two ways: name the allergen source in parentheses within the ingredient list (for example, “flour (wheat)”), or add a separate “Contains:” line right after the ingredients.4Office of the Law Revision Counsel. 21 USC 343 – Misbranded Food Getting allergen labeling wrong can seriously harm a customer.
Nutrition Facts Panel Exemption
Most cottage food sellers don’t need a Nutrition Facts panel. The FDA exempts businesses with fewer than 100 full-time equivalent employees that sell fewer than 100,000 units of a given product in a 12-month period. You file a notice with the FDA annually to claim it, and it doesn’t apply if your packaging makes any nutrition claim like “low fat” or “sugar free.” A separate exemption covers small retailers with annual gross sales of $500,000 or less and doesn’t require a notice filing.7U.S. Food and Drug Administration. Small Business Nutrition Labeling Exemption
Permits, Food Safety Training, and Insurance
The permit picture depends entirely on where you live. Some states require cottage food producers to register with the health department and pay a small annual fee, often under $50. Others let you operate with no permit at all as long as you stay within the allowed product types and revenue cap. Either way, expect to provide your production address, a description of what you make, and possibly a list of your equipment. Where a permit is required, some jurisdictions conduct a kitchen inspection before approval, and two to four weeks is a common timeline.
Many jurisdictions require at least one person in the operation to hold a food handler’s certificate or food safety manager certification. These courses cover safe cooking temperatures, cross-contamination, and storage, and typically run a few hours online for $15 to $30. Even where it isn’t required, the practical knowledge is worth the cost.
Product Liability Insurance
Liability insurance isn’t legally required in most states, but operating without it is reckless. A single foodborne illness claim can generate medical bills and legal costs that dwarf what a small operation earns in a year. Policies designed for cottage food producers typically start at $1 million per occurrence and cost between $250 and $500 annually at low volume. Insurers ask for your estimated annual revenue, a product list, and your production methods. Many farmers markets and retail venues require proof of coverage before they’ll let you set up, so insurance often becomes a practical requirement even where the law doesn’t demand it.
Handle Your Taxes
Income from selling treats is self-employment income, reported on Schedule C of your federal return. If your net profit (revenue minus expenses) exceeds $400 in a year, you owe self-employment tax on top of regular income tax.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The self-employment tax rate is 15.3%, covering Social Security (12.4%) and Medicare (2.9%). The Social Security portion applies to the first $184,500 of net self-employment earnings in 2026; Medicare has no cap.9Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
Track every business expense from day one: ingredients, packaging, equipment, market booth fees, insurance premiums, mileage to sales events. These deductions cut your taxable profit directly. Many first-year treat businesses run at a loss once startup costs are counted, which can offset other household income on a joint return.
Sales Tax
Whether you collect sales tax depends on your state. Some states exempt food sold at farmers markets or homemade food products entirely. Others require a sales tax permit, collection on each sale, and monthly or quarterly remittance. Check with your state’s department of revenue. If you sell online to customers in other states, economic nexus rules can eventually require you to collect sales tax in states where you cross their threshold, but most cottage food operators selling locally won’t get anywhere near it.
Keep the Business in Good Standing
Forming an entity isn’t a one-time event. Most states require LLCs to file an annual or biennial report with the Secretary of State, even when nothing has changed. The report confirms your registered agent, business address, and active status. Missing the deadline can bring late fees or administrative dissolution of your LLC, which wipes out the liability protection you formed it to get. Put the deadline on your calendar.
Keep food handler certifications current (most expire after three to five years), renew any cottage food registrations your state requires, and maintain your liability insurance without gaps. If your revenue starts approaching your state’s cottage food cap, research commercial kitchen options before you hit the limit, not after.