Plan your first steps: research local requirements, choose products, and organize your business.
Beginner3 published guides
Educational reading, not legal advice or a training credential. Confirm current requirements with your state and local agencies. Browse the state directory.
1
What Is Cottage Food? A Complete Introduction
Learn exactly what cottage food laws allow, which states participate, and how to legally sell homemade food from your kitchen.
What Is Cottage Food?
Cottage food refers to certain types of non-potentially-hazardous food products that individuals are legally allowed to produce and sell directly from their home kitchens, without the need for a commercial kitchen license or a food establishment permit. The term comes from the idea of a "cottage industry" — small-scale production done at home.
As of 2025, all 50 U.S. states plus the District of Columbia have some form of cottage food legislation on the books. However, the rules vary dramatically from state to state. Some states like Utah and Wyoming have very permissive laws with high or no revenue caps, while others like New Jersey have far more restrictive requirements.
Why Cottage Food Laws Exist
Before cottage food laws, anyone who wanted to sell homemade food commercially had to rent or build a licensed commercial kitchen — a barrier that could cost $20,000 to $100,000 or more. State legislators recognized that many low-risk foods (baked goods, jams, honey, dry mixes) could be safely produced at home, and cottage food laws were created to:
Lower the barrier to entry for home-based food entrepreneurs
Support local economies and farmers markets
Allow home cooks to test business ideas without massive upfront investment
Preserve traditional food production methods
2
Understanding Revenue Caps: State-by-State Limits
Every state sets a maximum you can earn under cottage food protection. Learn the caps, what counts toward them, and how to plan for growth.
What Are Revenue Caps?
A revenue cap (sometimes called a "sales limit" or "annual gross sales cap") is the maximum total dollar amount you are allowed to earn from cottage food sales within a calendar year. Once you exceed this cap, you must either stop selling or transition to a commercially licensed operation.
Revenue caps exist because cottage food laws were designed as an on-ramp for small producers, not a permanent alternative to commercial food safety regulation. The idea is that once your business reaches a certain size, you should be operating under the full inspection and licensing framework.
How Caps Are Calculated
In most states, the cap is based on gross revenue — the total amount of money you receive from cottage food sales before any expenses. This means:
If your cap is $50,000 and you sell $50,000 worth of cookies, you have hit the cap — even if your ingredient costs were $20,000 and your actual profit was only $30,000.
Sales tax collected is generally not counted toward the cap (cottage food is often exempt from sales tax, but check your state).
Tips or donations are a gray area — play it safe and count them.
A few states use (profit after expenses), but this is uncommon. California's AB 626 Microenterprise Home Kitchen Operations (MEHKO) program uses gross revenue.
3
Business Entity Setup: LLC, Sole Proprietor & EIN
Should you form an LLC or stay a sole proprietor? Learn about business structures, EINs, and registration steps for cottage food businesses.
Do You Need a Formal Business Entity?
Technically, no. In most states you can sell cottage food as an individual (sole proprietor) without forming any business entity. Many cottage food producers operate under their own legal name with no formal registration beyond what their state's cottage food law requires.
However, there are compelling reasons to consider a more formal structure, especially as your business grows.
Sole Proprietorship
A sole proprietorship is the default business structure. If you sell cookies at a farmers market under your own name, you are a sole proprietor — no paperwork required to create it.
Advantages:
Zero cost to set up
No annual filing fees
Simple tax filing (Schedule C on your personal Form 1040)
Full control over business decisions
Disadvantages:
No liability protection — if someone sues your business, your personal assets (home, car, savings) are at risk
Ready to Apply What You Learned?
Use our free tools to put this knowledge into action.
Pet food or animal treats (some states allow, most do not)
How to Get Started: 5 Steps
Check your state law. Visit your state's Department of Agriculture website or use our State Wizard tool. Look for the specific cottage food statute — search for terms like "cottage food," "home food processing," or "home kitchen."
Identify your products. Choose items that fall within your state's allowed product list. Stick to non-potentially-hazardous foods unless your state explicitly allows otherwise.
Register if required. About half of states require some form of registration, permit, or notification before you begin selling. Fees typically range from $0 to $75. Some states require a food handler's safety course.
Create compliant labels. Nearly every state requires at minimum: product name, ingredient list, allergen warnings, your business name and address, net weight, and a "Made in a Home Kitchen" disclaimer. See our Labeling 101 guide for details.
Start selling. Most cottage food laws restrict your sales channels to direct-to-consumer transactions — farmers markets, roadside stands, community events, and sometimes online ordering with in-person pickup. Some states now allow shipping within state lines.
Revenue Caps at a Glance
Revenue caps are the maximum amount you can earn annually under cottage food protection. These vary widely:
| State | Annual Cap |
|-------|-----------|
| California | $75,000 |
| Texas | $50,000 |
| Florida | $250,000 |
| Utah | No cap |
| Wyoming | No cap |
| New York | $50,000 |
| Ohio | $50,000 |
| Michigan | $25,000 |
If you exceed your state's revenue cap, you will generally need to transition to a licensed commercial kitchen or obtain a food establishment permit.
Important Disclaimer
Cottage food laws change frequently. Always verify your state's current requirements with your state Department of Agriculture or Department of Health before beginning production. This guide provides general education and is not a substitute for legal advice.
net revenue
State Cap Examples
Here is a sampling of revenue caps as of 2025:
| State | Annual Cap | Notes |
|-------|-----------|-------|
| Alabama | $30,000 | Direct sales only |
| California | $75,000 | $75K for "Class B" (with permit); $50K for "Class A" |
| Colorado | $50,000 | |
| Florida | $250,000 | One of the most permissive states |
| Georgia | No specific cap | Must sell direct; registration required |
| Illinois | $50,000 | |
| Michigan | $25,000 | Among the lowest caps |
| New York | $50,000 | Varies by county enforcement |
| Ohio | $50,000 | |
| Texas | $50,000 | Recent increase from $50K; direct sales only |
| Utah | No cap | One of the most permissive cottage food laws |
| Wyoming | No cap | Very few restrictions |
Always verify current limits with your state Department of Agriculture. Legislatures update these numbers regularly.
Tracking Your Revenue
Accurate record-keeping is essential. The IRS requires you to report all business income regardless of whether you are under a cottage food exemption. Best practices:
Use a dedicated bank account. Mixing personal and business funds makes tracking nearly impossible.
Record every sale. Keep a simple spreadsheet or use our built-in revenue tracker. Log date, product, quantity, price, and customer (if applicable).
Issue receipts. Even at farmers markets, provide a receipt for every transaction. This protects you and your customer.
Check your total monthly. Do not wait until December to discover you are at $49,000 with holiday orders pouring in.
What Happens When You Hit the Cap?
When you reach your state's revenue cap:
Stop selling cottage food products immediately for the remainder of the calendar year, OR
Transition to a commercial license. This typically involves renting a shared commercial kitchen, passing a health inspection, obtaining a food establishment permit, and often completing additional food safety training.
Some states allow you to apply for a higher-tier permit (like California's Class B permit) that raises the cap without requiring a full commercial kitchen.
Planning for Growth
If you are approaching your cap, consider these strategies:
Raise prices. If you are selling high volume at low margins, raising your price per unit means fewer total transactions for the same revenue — and higher profit per sale.
Shift to higher-margin products. A decorated custom cake at $85 is far more cap-efficient than selling 170 cookies at $0.50 each.
Explore shared kitchens. Many cities now have commercial kitchen rentals starting at $15-25/hour. This lets you exceed the cap legally.
Check neighboring states. If you live near a state line, the neighboring state's rules may be more favorable (though you can only sell in the state where you produce).
Harder to open a business bank account at some institutions
Looks less professional to wholesale buyers or commercial partners
Cannot easily bring in partners or investors
Limited Liability Company (LLC)
An LLC creates a legal separation between you and your business. If someone files a lawsuit against your cottage food business, they can generally only go after the LLC's assets — not your personal property. This is called the "corporate veil."
Advantages:
Personal asset protection
Professional appearance
Easier to get a business bank account, credit card, or small business loan
Flexible tax treatment (can elect S-corp taxation if beneficial)
Can have multiple members (useful if you partner with someone)
Disadvantages:
Filing fees range from $40 (Kentucky) to $500 (Massachusetts) depending on your state
Annual report fees in most states ($0 to $300/year)
Slightly more complex tax filing
You must keep business and personal finances separate or risk "piercing the corporate veil"
Getting an EIN (Employer Identification Number)
An EIN is a federal tax ID number issued by the IRS. It is essentially a Social Security Number for your business. You need one if you:
Form an LLC or corporation
Plan to hire employees
Want to open a business bank account (many banks require it)
File excise tax returns
You can apply for an EIN for free at irs.gov/ein. The process takes about 5 minutes and you receive your EIN immediately. There is no fee — beware of third-party websites that charge for this service.
Even sole proprietors can get an EIN. It allows you to give vendors and banks your EIN instead of your Social Security Number, which is a significant privacy benefit.
DBA (Doing Business As)
If you want to operate under a name other than your legal name (e.g., "Sweet Southern Kitchen" instead of "Jane Smith"), you will need to file a DBA (also called a "fictitious business name" or "assumed name certificate") with your county or state.
Cost: Typically $10 to $50
Process: File with your county clerk's office; some states require publication in a local newspaper
Duration: Usually valid for 5 years before renewal
Step-by-Step: Setting Up Your Business
Choose your structure. For most cottage food producers starting out, begin as a sole proprietor. Consider an LLC once you are earning more than $10,000-$15,000/year or selling at venues where liability exposure is higher.
Pick your business name. Check your state's business name database to ensure it is available. Avoid names that are too similar to existing registered businesses.
File your DBA (if using a business name different from your legal name). File with your county clerk.
Form your LLC (if applicable). File Articles of Organization with your state's Secretary of State office. You can do this yourself online in most states — you do not need a lawyer or a formation service, though they can be helpful.
Get your EIN. Apply free at irs.gov regardless of business structure.
Open a business bank account. Bring your EIN confirmation letter, DBA filing (if applicable), and Articles of Organization (if LLC). Most banks offer free or low-cost business checking accounts.
Set up bookkeeping. At minimum, use a spreadsheet to track all income and expenses. For cottage food, common deductible expenses include ingredients, packaging, labels, farmers market booth fees, mileage to sales locations, and a portion of home utilities used for production.
Tax Obligations
Regardless of your business structure, you must report all cottage food income to the IRS. Key points:
Self-employment tax of 15.3% applies to net self-employment income over $400/year (this covers Social Security and Medicare)
Quarterly estimated taxes may be required if you expect to owe more than $1,000 in a year (use IRS Form 1040-ES)
State income tax applies in most states
Sales tax — many states exempt cottage food from sales tax, but not all. Check your state law.
Keep all receipts for business expenses. Common deductible expenses for cottage food businesses include ingredients, packaging materials, labels, booth or table rental fees, business insurance premiums, and the home office deduction (if you have a dedicated production space).