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 separate from personal money lets you see your real margin instead of 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.

7. Know what each product costs, and what to make

Accounting software records money after it has moved. It can't tell you what a recipe costs to make, whether a farmers market or café price covers your costs, or what to buy for next week. Before your first order, cost each product properly (see how to cost a recipe) and keep every order in one place, so you can total them and plan what to make and buy.

A spreadsheet and a notebook will do at the start. MakrPrep does costing, pricing, orders, production planning and shopping lists in one place, and you can try it free for 14 days.