How to start a food business in the US: cottage food laws, licensing, and costing

Here's the thing most guides won't tell you upfront: there is no single "how to start a food business in the US" checklist, because your state decides most of the rules. What follows is the shape of the process, but you must check your specific state before you make a single sale.

1. Find out if your state has a cottage food law

Most states let you sell certain low-risk foods (baked goods, jams, dry goods) from a home kitchen without a commercial license, but the details vary enormously. Some states cap your annual revenue. Some ban wholesale or online sales entirely, restricting you to direct, in-person sales only. Some require a permit and inspection even for cottage operations, others require nothing but a food safety course. Search "[your state] cottage food law" before assuming anything below applies to you.

2. Register your business structure

Most people starting out register as a sole proprietor, which is simple but offers no liability separation. An LLC costs more to set up but protects personal assets if something goes wrong. Either way, you'll need an EIN (Employer Identification Number) from the IRS if you plan to hire anyone or open a business bank account, most banks require one even for sole proprietors.

3. Get liability insurance

Even under a cottage food exemption, most states don't shield you from a customer's allergic reaction, a foodborne illness claim, or an accident at a farmers market stall. General liability insurance for a small food business is inexpensive relative to the risk, and some markets and events won't let you set up a table without proof of it. A handful of cottage food laws even require it outright. Sort it before your first sale, not after your first claim.

4. Open a separate business bank account

Keeping business money apart from personal money isn't just tidier, it's the difference between knowing your real margin and guessing at it. Most banks and business-focused fintechs (Novo, Bluevine, Mercury for larger operations) offer accounts that set up in a day or two.

5. Connect your bank to accounting software

Once you've got a business account, link it to something like QuickBooks or Wave. This gets your income and expenses tracking automatically, which matters more in the US than most places, since you're usually responsible for quarterly estimated tax payments, not just an annual return.

6. Food handler certification and labelling

Most states require some form of food safety training even for cottage operations. Pair that with getting your allergen labelling right from day one, see our FALCPA allergen guide for the federal baseline, then check your state's additional disclosure rules.

The system most new food businesses skip

Accounting software tracks money that's already moved, and with quarterly estimated taxes it's non-negotiable, but it was never built to tell you what a recipe actually costs per portion, whether that farmers market order was priced correctly, or what you need to buy this week versus what's already sitting in your kitchen. That's a different job, and with sales tax and resale rules adding another layer for wholesale sellers to track, it's one most new food businesses skip, right up until they realise they've been selling at a loss for months without knowing it.

This is the same reason accounting software exists in the first place: a growing business runs on systems, not memory. You wouldn't track quarterly taxes in your head, and past a certain point, you can't track your true costs, your orders, and your prep list in your head either. Every order that comes in, every ingredient price that shifts, every recipe that needs scaling up for a bigger week, that's all real information, and without a system for it, it lives in a notebook, a group chat, and whatever you remember standing in the kitchen the morning of a market.

The businesses that grow past the first year are usually the ones that put a system under the parts that used to be guesswork: accounting software for the money that's already moved, and something built for costing, pricing, orders, and production planning for the money that's about to move. One tracks where you've been. The other tells you where you're going, and stops you running out of stock, underpricing a wholesale order, or prepping twice as much filling as you actually needed.

Worth sorting before your first invoice, not after.