Characteristics of an Entrepreneur Mindset
An entrepreneurial mindset is determined, creative, resourceful, and resilient in the most adverse circumstances. An entrepreneur mindset is often positive thinking and comfortable with discomfort.
Brad Nakase, Attorney
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Louis has been raising bees since he was a kid. Because of this, he eats honey on everything: honey on toast, in cereal, on ice cream, even on hamburgers! There is no limit to Louis’ love for all things honey. Louis would love to share his love of honey with his community and offer his neighbors a taste of heaven. He has also been working on adding flavors to his honey, including lavender and cinnamon. There is a local farmers’ market in California at which he would like to sell his homemade food. However, Louis wonders whether he needs a license to sell his homemade honey. Can he just show up and start selling? Or do all food products need a license or permit in California? Confused, Louis decides to go to the next farmers’ market to ask one of the other honey sellers. The person he asks is very helpful to a fellow bee-lover, and he tells Louis that it is necessary to obtain a Class A permit to sell honey at the farmers’ market.
Selling Homemade Food in California
In California, selling homemade food has become increasingly popular. The public’s interest in buying locally and being resource-conscious has led to the continued growth of the cottage food industry. To sell a tasty homemade creation is an attractive prospect for every chef or aspiring businessperson. However, before an individual can go out and get selling their homemade treats in California, there are some legal hurdles to consider.
Before selling any homemade food, it is necessary to know what foods can be prepared in a home kitchen in California. This is because California’s cottage food law regulates the types of food products that can be sold. A cottage food producer should also consider what business structure to choose, apply for the relevant permits and licenses, learn about food safety, and get insurance for their personal business. It is also important to learn about employment rules if one plans on hiring an employee to help out.
Homemade Food that Can Be Sold in California
Under California law, only certain types of food may be produced in a home kitchen for sale. These include:
- Baked goods without dairy or meat fillings (ex: bread, cookies, churros, pastries, etc.)
- Candy
- Dried fruit
- Chocolate-covered nuts and dried fruit
- Fruit pies
- Granola, trail mixes
- Herbs
- Honey
- Jams, preserves
- Nut butters
- Dried pasta
- Popcorn
- Vinegar, mustard
- Coffee, tea
The California Department of Health provides a comprehensive list of the foods that can be legally prepared in a home kitchen.
Selecting a Business Structure
Typically, home-based food businesses are small, and the state actually encourages a smaller structure. California requires that cottage food businesses be run by an individual operator only, and there can be no more than one employee. A home-based food business also has its earnings limited by the state. As of 2022, Class A operations can only earn a maximum of $75,000. Class B operations can only earn a maximum of $150,000.
Running a very small business limits one to a sole proprietorship, realistically. However, being a sole proprietor means that one is personal responsible for every aspect of the business. So, if a customer gets sick from the food and sues, the business owner is responsible for damages. If financially possible, a home-based food producer should consider a business entity that protects from personal liability. A limited liability company or a corporation would offer protection from lawsuits, so that a business owner does not lose their personal assets in the event of a lawsuit.
Example: Linda sells homemade peanut butter out of her home. Everyone in the community loves Linda’s peanut butter, and her business is doing great. However, recently Linda had a scare. A little boy ate some of Linda’s peanut butter, unaware that he was allergic to peanuts. The boy ended up in the hospital with anaphylactic shock. Though he was okay, his parents threatened to sue. Linda was afraid she might lose everything in a lawsuit. As a result of that incident, Linda is thinking about setting up a limited liability company, which would protect her assets in the event of a lawsuit. Considering how many people are allergic to peanuts, it doesn’t seem like a bad idea.
What License and Permits Do I need for Sell Homemade Food in California?
In order to run a homemade food business in California, an individual must get a permit from the county health department. There are two types of permits to choose from. Which one an individual picks depends on whether they want to sell products directly to consumers or through third-party local businesses such as restaurants or stores.
Class A Permit
A Class A permit allows an individual to sell directly to customers within the state of California. An individual with a Class A permit can sell their food at farmers’ markets, festivals, and from their own home. The point is that the buyer can purchase the food products directly from the seller. In order to get a Class A permit, an individual must fill out a self-certification checklist. However, there is no mandatory inspection of one’s kitchen.
Example: Francis makes his own granola mixes to sell to the local community. He applies for a Class A permit so that he can sell his granola at the local farmers’ market, where his trail mix is a hit.
Class B Permit
A Class B permit is necessary for individuals who want to sell their food products indirectly to customers in California. For example, a person might want to sell their product through a grocery store or restaurant. They are simply providing the product, and the third-party is doing the selling. In California, an individual may not sell indirectly to anyone outside one’s own county. The exception would be if the county where one wants to sell has specifically allowed indirect sales of homemade food products. An individual must pass an annual kitchen inspection to receive a Class B permit.
Example: Jonathan loves making gourmet cookies, but he’s not very interested in the process of selling them. After getting a Class B permit, he makes a deal with a local grocery market to sell his cookies to customers.
What information do I need to apply for license and permits to sell homemade food in California?
When applying for a California Class A or Class B permit, certain information must be provided. This information includes the following.
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- Ingredients or recipes for products
- Sources of ingredients
- Copies of product labels
- Description of packaging
- Floor plan of kitchen
- List of equipment, utensils, etc.
- Certificate showing completion of food processor course approved by the California Department of Public Health
It is also necessary to get all the relevant licenses and permits needed for businesses, such as a local business license.
Food Handler’s License in California
For anyone who wants to sell their homemade food from home in California, it is necessary to complete a California Department of Public Health food processor course. This must be done within three months of getting a cottage food permit. After finishing the course, an individual should keep the food handler card or certificate of completion.
Before an individual can begin selling food from home, the business needs to comply with health and safety rules. These requirements include the following.
- While preparing cottage foods, domestic activities (laundry, cleaning, entertaining) cannot be taking place
- Infants, children, and pets cannot be in the kitchen
- Equipment and utensils must be kept clean
- Food contact surfaces and equipment must be clean and sanitized
- Food prep and storage areas must not be infested with rodents or insects
- Smoking is not allowed in the kitchen
- An individual with a contagious illness may not be involved in food prep or packaging
- Handwashing is mandatory
- Water used to cook, clean, and wash hands must be potable
Homemade Food Business Insurance
When one operates a homemade food business, there are unique risks. These risks range from food-borne illnesses to foreign objects in food — imagine a piece of glass in your jar of preserves! There are also the usual business risks to consider, including fire and theft. Homeowners’ or renters’ insurance will not necessarily cover a home business. To find a good insurance agent for additional coverage, one should ask other food business owners for suggestions. General commercial liability is a good policy to have. This will cover a diverse range of risks, such as employee injuries on the job as well as customers getting sick from food.
Hiring Employees
In California, a person who operates a cottage food business can work alongside their family producing homemade food. But beyond immediate family, the law only allows for one full-time employee.
If a cottage food producer decides to hire an employee, he or she should educate themselves about employment law. They should review hiring rules, how to avoid discrimination, and how to handle income taxes and workers’ compensation.
The Homemade Food Operations Act
California recently passed the Homemade Food Operations Act in 2018. This act expanded the cottage food law and legalized microenterprise home kitchen operations. Under the law, people can operate a restaurant out of their private homes. However, there are restrictions:
- No more than one non-family employee
- Food must be cooked and served on the same day
- No raw milk products or oysters
- A maximum of 30 meals in one day
- $50,000 annual cap on sales
- Can only sell directly to consumers, not through third parties
- Must follow health standards
- Must register the kitchen in the county and pass an inspection
Counties can decide whether to participate in the program, so anyone interested in operating a home kitchen should check with their county first.
