Prior to launching a homemade food business located in the state of California, it makes sense to be aware of cottage laws as well as other legal hurdles, including permit requirements.
If you are excited about the prospect of homemade food in the great state of California, you are on the verge of joining many other entrepreneurs who have made the leap into a fast-growing, dynamic industry full of creativity, fun, and of course, great food! However, before you begin firing up the oven, there are some fundamental legal matters to consider. What are some of these issues?
A Homemade Food Example
Let’s say are some foods that you can prepare in a home kitchen, and some you cannot. Also, you will want to select an appropriate structure for your new business, put in applications for licenses as well as permits, consider the ins and outs of homemade food safety, even make sure your business is insured. Also, you will want to make sure you are ready to hire employees when that time arrives and familiar with the rules concerning that as well.
Here, we will provide a comprehensive guide to get you up and running. The sooner you are familiar with the necessary rules and regulations, the sooner you can start cooking and baking your delicious homemade food in California!
Douglas Wade, Attorney
What Are the Allowed Homemade Foods in the state of California?
It is possible to register your kitchen at home, in California, to cook these food products:
- Puzzles and waffle cones
- Dried pasta
- Dried fruit
- Dry mixes for baking
- Mole paste (dried), herb blends
- Popcorn, granola, trail mix, cereal
- Nut butter, nut mix
- Sorghum syrups (sweet), honey
- Mustard, vinegar
- Nut brittle and other candies like toffee
- Chocolate-covered nuts or fruits, chocolate-covered goods that are nonperishable
- Fruit tamales, fruit empanadas, pies with fruit filling
- Coffee, (roasted), tea (dried)
- Baked goods sans custard, meat filling, or cream (this could be bread, biscuits, pastries, cookies, or a tortilla or churro)
- Fruit butter, jelly, jam, preserves—must comply with Part 150, Title 21 Fed. Regulations Code
Additional Information
For more about this comprehensive list, or if you have questions, there are resources online at the CA Dept. Public Health’s website. Check it out!
Homemade Food Business Structures
We do not want to generalize too much, but many homemade food businesses in California are fairly small, and they intend to stay that way. One of the reasons for this is that in the state of California, homemade food companies can only have one individual who is the operator. That operator may only employ a single full-time individual as an employee, as well. There are also limits on the profits that homemade food businesses earn per year. The limit right now, up from $35,000 as of 2013, is $50,000 annually in gross revenue. So, as opposed to prior years, you stand to make more of a profit today, which is nice!
Learn more: Compare business structures
Unique Industry Demands
Before you get too excited about your profits, however, remember that making California homemade food does come with its unique demands. Small businesses like this are often run as sole proprietorships, and this type of business structure brings with it a lot of responsibilities. Sole proprietors are personally culpable for each aspect of their companies, including payment of taxes.
Sole Proprietorship Risks
If you run your homemade California food business as a sole proprietorship, there are also risks you assume that come with the selling of homemade food products. In a worst-case scenario, these foods could cause illness and even injury to your customers, and it is important to be prepared for that. Luckily, you can buy liability insurance in order to securely defend your small company and its assets.
Vary Your Structure
Another option is for you to choose a different structure. This could be an LLC or corporation. In contrast to sole proprietorships, these structures would place the responsibility for any damages onto your business, as opposed to yourself. This way, if someone becomes sick or is harmed in some way by your homemade food, you would not be personally responsible for these damages. Instead, your business would need to deal with any sorts of refunds or legal actions such as fines or lawsuits against you. Hopefully, this will not happen with your homemade food business, but it is always good to be prepared.
Be Prepared
In summary, it is not the end of the world if you structure your business as a sole proprietorship—in fact, many small homemade food businesses do. You simply need to be prepared, knowledgeable, and ready to assume the risks. If you are able to choose a different structure, it may be worth looking into, but many small companies are simply not able to or do not want to. If an LLC or other type of corporation is not feasible, you will fare well with a sole proprietorship.
Licensing and Permits
It is important that your homemade food business registers for a permit with the health department of your specific county in California. There are two different permits types, and your choice depends on one of your business strategies: Do you plan to sell your food products to your customers directly? Or, is your business strategy to pair up with other local business entities and get your products in peoples’ hands that way? Either policy can prove successful; it is all up to your specific company vision. Let’s take a look at the two different types of permits.
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Class A
In order to sell to your customers directly, you will need a permit from Class A. This little slip of paper will allow you to get your homemade fare into the hands of eager customers at festivals and farmers’ markets. You can also sell goods straight out of a home or pursue alternate methods, as long as customers are purchasing products from you directly. How do you get your hands on this permit? You will need to complete a checklist (a process known as self-certification). For Class A, there are no physical inspections of cooks’ kitchens.
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Class B
Curious about Class B Permits for your burgeoning homemade food business? Class B permits are made for selling to customers in an indirect fashion, as opposed to Class A’s directness. If you are planning on selling your products through restaurants, or you have your eyes on some stores that seem perfect for carrying your products, this permit may be right for your business. Be aware, however, that in California, a business cannot sell indirectly to customers in one chosen own specific county. The loophole here is that if the county specifically states they are going to allow homemade foods to be sold in an indirect fashion.
For Class B, your kitchen will need to pass a physical inspection, so make sure to be prepared for that. This type of inspection will occur annually.
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How to Apply
Applying for either one of these important permits is not too difficult, but you will need to supply some specific information. It may help to make a list including the entries you will need, either online or in a notebook:
- Describe the packaging of your homemade product
- Provide your kitchen’s floor plan
- Provide a listing of the surfaces that the food products come into contact with
- Provide an equipment list (for example, do you use utensils? Do you use a specific oven or pan?)
- Provide a list of ingredients’ sources
- Provide copies of the labels of the products you make
- Perhaps most importantly, provide your certificate showing that you completed the food processor class and show approval by the CA Dept. Public Health
Additionally, you will need to procure the permits and the licenses that all businesses must have in California. These include local business licenses and the registration of fictitious business names if you have used one.
The Importance of Staying Safe
Now more than ever, safety is a top priority. To create delicious homemade food in California and run a successful homemade food company, you need to take a specific course, so get ready to go back to school! You will need to pass what is known as a food processor class, and this needs to be done under three months after getting your permit. Also, it goes without saying that health safety is a priority, so your small business needs to be in compliance with a set of distinct rules.
Safety Checklist
- You cannot handle domestic activities—such as dishwashing, meal prep for your family, washing your laundry, even entertaining friends or guests—at the same time that you prepare your homemade food products.
- You also cannot have small children/infants in your kitchen as you prepare homemade food. This goes for pets too!
- You must remember to wash, rinse and sanitize the surfaces that contact foods, as well as equipment. This must be done after each use.
- It goes without saying, perhaps, but all areas used for prep and storage need to be absolutely free from insects or rodents.
- Smoking is restricted during homemade food preparation and cooking/processing.
- Persons with any form of contagious illness are restricted from prepping or helping to package homemade foods.
- Washing of hands in proper fashion must be done by all people involved in the production of homemade foods.
- If using water to prep foods, the water must be clean and potable. This goes for handwashing and equipment. And if you are using water in your recipes for food, it also must be certified potable.
Insurance Questions
Many homemade food enthusiasts in California have questions about how insurance policies work to protect them. As all restaurant owners know, there are special risks that come with the homemade food business, and these range from finding foreign objects such as glass in food to food-borne illnesses that can easily pass from the homemade product itself to consumers.
There are additional risks that can impact any business, as well. These can range from employees injuring themselves on the job site to unfortunate but realistic events such as fires on the property or break-ins.
Finding a Policy
One thing to emphasize: it is wrong to assume that a normal homeowner’s policy or renter’s insurance will take care of homemade food businesses. You can check, but your old policy probably will not cover these new risks. Therefore, it is prudent to carefully evaluate the existing policy that you have and then get in touch with an agent who has a good reputation in the field.
Finding an Agent
You know you need insurance, but how do you go about locating an excellent agent who will understand your needs and be right for your business? One thing you can do is ask other homemade food purveyors for recommendations. Usually, those in the field have solid local knowledge. Also, you can try to find an agent who possesses experience with food companies, whether it is writing policies or other tasks.
When you find your chosen agent, make sure that you let them know the types of risks that you are worried about. Creating food products in your own home is a unique situation, so the risky situations are also unique. For example, you may have an employee that is burned by hot food, broth, or water. You might have customers who want to take legal action against you because they claim that your food made them sick.
Some California homemade food companies use vehicles for the transport of goods if this sounds like you, make sure that your vehicle has the right insurance as well.
Employee Questions
Your homemade food business in California is only allowed to have a single full-time employee to help out. However, it is acceptable to have family members or household members help you prep food and complete other tasks. Making sure that you are in tune with all of the state’s health/safety codes is key, and it is also important that you follow the regulations involving workers and employees.
If you think a full-time worker would really help your California homemade food business shine, we recommend that you take some time to learn about some of the more fundamental employment rules and regulations before hiring anyone. From tax questions to discrimination to worker’s comp., there are some important issues to make sure you understand. An employee can be helpful and worth it for your company, but they can also make running for homemade food business in California more complex.
California’s Homemade Food Businesses Welcome You
We hope this article has provided information relevant to your first foray into cooking up homemade cuisine. Making homemade delicacies at home can be exciting and lucrative, but there are also various issues, rules, and regulations to stay on top of. Overall, if you stay informed and run your business with care, you should enjoy a successful—and delicious!—career. Make sure to check in with the state of California often, as rules for homemade food businesses in California often change. Most importantly: good luck on your new road to culinary delights, created in your own home!