You are looking to start a food business, or maybe you're on the verge of getting one up and running, but you don't know what kind of permit, license, or insurance that you really need. I'm going to show you exactly what you would need to do based on where you want to start your food business and we are getting started right. All right, so I'm going to explain to you exactly what you are going to need as far as the types of permits and licenses and even business insurance to get your food business up and running.
This is one of the most frequent questions that I get, not only from my subscribers, but also from my clients that I do my consulting with. And by the way, really quick, if you are not subscribed to our channel, click that magical red button down there, hit subscribe and the notification bell so you can see all of the new videos that come up every single week. So let me jump right into it. So, I want to explain to you licenses and permits. Need more resources to start a food business?
So this is something that gets kind of confusing, but I'm going to kind of break it down for you and give you some great tips on what you might need and what you might not need. Now, the reason why I say you might need this, or may not, is because every state is different. And the regulations that operate in each state, in a really quick and easy way to say, vary greatly.
Now, this is going to be highly dependent upon where you're going to operate the business. If you're going to be at home or in a commercial kitchen, the types of licenses and insurance and all of the regulations that regulate those businesses are going to vary dramatically. Now I'll give you a basic rundown of what you can expect, starting in your cottage food business. So if you're starting from home, that's going to be considered a cottage food business. Now, what types of permits do you need and what types of licenses? And do I have to have food business insurance?
Number one, in most states, they will not require you to have a business license. Now that's actually something that's very odd and it may sound like, what do you mean? How could you make food in a home and give it to people and sell it and not have to have a business license? This is where you will need to do a little bit of research and dig into the magical Google button. You need to go over to Google and type in your state and more specifically, where you are. And then from there, type in Cottage Food Law. And if it happens to be as an example, let's say Los Angeles, California.
Type in Los Angeles, California Cottage Food Law. And there will be some resources that will pop up for your state specifically. And you could click on those links, and most of them are state websites that are going to show you exactly what would be needed in order for you to get started. Now, what can you expect if you do start from home? Some of the permits are as follows: They're going to require you to have a business license. In essence, you are actually operating a business from home. It is a food-based business, but it is still a business. Now, my recommendation is that, in some states that do not require it by law, I would highly recommend that you incorporate yourself as a business as well.
The reason is that you want to protect your assets. If you have a home and you are producing a baked good and you take it to a farmer's market and somebody gets sick and sues you, you could lose your house, your car, your savings, and everything you own. That potentially could happen. Now, if you create a business, you incorporate yourself, and you get food business insurance to cover the production of the food that you make, you are going to set yourself up for success.
Because I don't wish this upon anybody, but if it happens and somebody gets sick and they have the potential to sue you, well, that's going to cause a big, big problem for you, okay. So get yourself incorporated and get yourself some insurance to separate you from your business. In some states, if you work from home, you may be on a well.Maybe the water that comes into your home actually comes from a well on your property. That actually has to be examined by the county. Now again, the county and cities operate under different ordinances that they have established based upon the rules they have established. That has nothing to do with the state, but it has to do with the municipalities and the local laws that regulate home-based businesses. So there is a difference between those.
Make sure you understand that. And if you are operating from a home that has well water as opposed to city water, the well water will have to be checked and analyzed. Now that actually costs something because it's not a free service and you'll have to pay to have that analyzed if you are on a well. So keep that in mind. If you are on a septic tank and you're not on city water as far as using a septic tank, which are two different things, you then also need to have that looked at to make sure that it's functioning properly, because you will be operating a food business from your home, so your water usage will go up. That is another permit that you may potentially have to pay for to have someone inspect your septic tank. Okay?
Every state does not require this, but some states do. And it's called a food handler's license or a food handler's course. And 99% of the time, nowadays, you can actually take that course online. A food handler's license is basically a basic educational program that will explain to you how to handle food in a safe and sanitized way, making sure that you understand how it works and how to clean up after yourself. Some states require that and some states do not. Again, this is where the magical Google button comes into play. And you need to find out specifically for your county, city, and state if they require that. Okay? Now next up is, as I mentioned briefly a little while ago, business insurance. Now, again, if you're producing a food product where someone could potentially get sick and sue you, you want to make sure that you're covered and separate yourself from your business entity and from your personal possessions and assets. How do you do that? Business insurance, business insurance.
This means that you can actually get a policy to protect the food production that is going on on your home and your property, which you're going to sell at farmer's markets or wherever it may be. Now Damian, how much does that cost? Well, on average, a food business policy can range greatly from $300 to even up to $1000. However, the typical middle price, or median, is around $500 to $600 per year.You're probably thinking, "Oh my God, that's a lot of money." Well, it's really not. When you break it up over 12 months, the payment is normally a monthly payment, not an upfront payment.
And it could run about $40 to $50 a month, give or take. And that's really not a lot. You could go to a farmer's market on the weekend and sell a few hundred dollars, and you've already covered your entire month's worth of insurance right off the bat. So next up is doing business as a DBA. A DBA is going to allow you to set up a business under a name that does business as, let's say, Sarah's Chocolates, or something to that effect. You can do that so you can establish your business. Some states require a DBA and others don't. So again, this is going to be something that you need to Google just to find out for sure if it's something that's required. Many, many states don't require it. If you're going to incorporate as a business, you can create a business name for yourself and not necessarily have to create some kind of fictitious name or a DBA.
Okay? The next thing is a resale license. Now, if you are going to a store and you're going to buy flour and sugar and a whole bunch of baked goods, and you create a baked good item, you want to make sure that you get a resale license, because that's going to allow you to buy ingredients in bulk at wholesale pricing, et cetera, et cetera. And that is something that a lot of people don't think about getting. Now, normally, to my understanding, the resale license may cost very, very little, if any, probably about 40 to 50 bucks. 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, when you want to incorporate yourself and your food business, as I really, really recommend, it could be a couple of hundred dollars to maybe three or four hundred bucks, okay. I don't know if I've ever seen it go too high, as far as 500 or 400, but every state is different and if you have a lawyer do it for you and there are some other companies that come into play, it might go that high. When I got incorporated, I think it was about $300. It wasn't very expensive. Now the last thing you want to have, and potentially need to have, based on your state requirements, is a sales tax certification. It's this certificate that allows you, on behalf of the state, to sell products within the state. You have to collect sales tax and then give it to the state.
That's normally done so you can file it either quarterly, which means every three months, or you can just do it once a year. And it depends on the state and how they choose to classify you. So you want to check with your state and say, "Look, is this something that I'm not going to be collecting a lot of sales tax because I'm not making a lot of sales just yet." Can I do it annually instead of every quarter? When we actually started, when we just started, we were on the quarterly schedule. So every three months we did it, but now we're at the point where we're selling so much that we just do it once a year and it's one big lump sum. So keep in mind again, what I just told you about some permits and licenses and such that may be required by your state.
You just have to do a little bit of homework and double-check that. But those varieties of things are going to be the things that come into play when you start a food business from home. Now, the next one up is going to be if you are in a commercial facility. Now this changes the ball game dramatically, to be honest with you. There are a lot of other types of licenses and permits and even inspections when you begin to get into a commercial facility. Now to save yourself the headache of having to go through all of that, you can actually just rent the commercial kitchen that you don't own. You're actually just using the space and the equipment to create your food product and then get it out there to the public.
I personally, when you're starting off, don't recommend you diving into renting a huge building or warehouse and starting putting up freezers and coolers and tables unless you've got about two or 300 grand sitting in the bank and you have nothing to do with it. You can go ahead and do that and open one up. And even if you did have that much money, if you've never experienced a food business, or you're not familiar with how to grow a food business compared to others, that may be a huge waste of money.
So start small, always think big, but take really small steps and figure out if it's really something that you want to do. Commercial kitchens are great because they've already established all of those licenses and other things. The only thing that I would still recommend that you do, even if it's not required by your state, is to incorporate yourself as a business. Don't do this just as something on the side where you're not getting yourself covered with insurance or making yourself completely legal as a business. Make sure you cover your bases before moving forward with your plans to create your food product.protect yourself from the personal aspect.
You don't want to lose your house and lose everything you've worked hard for all your entire life, just because you didn't file papers of incorporation, or because you didn't get food business insurance, because you thought you couldn't afford it. So you rented a commercial kitchen, and then you got into trouble. So make sure you do that. And in some states that I've actually worked in, I've actually called and spoke with a handful of commercial kitchens to get a feel for how they worked in other states. Many of them actually require you to be an organization or be incorporated.
And you could do that just through a basic LLC. You don't have to be a C corp or an S corp, but that is your choice and your preference. But making sure that you also have food business insurance is something that a lot of commercial kitchens require, or they'll request to see documentation proving that you're insured just to cover yourself. So with that being said, I like to keep my videos short and sweet and kind of make sure I compact all of this information together really quickly and easily. So if you enjoyed this video and it was helpful, as always, let me know down below. Please do give me a big thumbs up. If you have questions about any of the permits or things that I discussed, as always, ask me. I'll get to it as soon as possible. And I'd like to see you in the next video. Take care.
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