Congratulations on making it to the final installment of my three-part series on how to start a home bakery in Maryland.

Now that you know how cottage food is defined in Maryland and how to package and label your cottage food products, it’s time to get into the legal side of running your home bakery.

I promise it’s not much! Part of what makes starting a business so intimidating is not knowing what to do.

But, once you do, the process becomes less overwhelming and you can move forward with confidence.

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Do I need an LLC to operate a home bakery in Maryland?

No, you do not need to file for a Limited Liability Company (LLC) to operate a home bakery in Maryland.

Many home bakers start as sole proprietors, which means there is no legal separation between the owner and the business.

Maryland does require sole proprietors to register with the state, which isn’t the norm compared to other states, but it is what it is.

You’ll also need to register a trade name (sometimes called a DBA, or “Doing Business As”) if you don’t plan on running your home bakery under your legal name.

The good news is that you don’t have to do everything at once. I didn’t start doing business as Cookie Cazimi until about three months after I started selling chunky cookies.

Personally, my Certified Public Accountant (CPA) recommended that I start an LLC. While a single-member LLC is generally taxed the same way as a sole proprietorship, it may provide additional liability protection and helps me keep my business and personal expenses separate.

The major con to starting an LLC is that I have to pay $300 to the state of Maryland every year just because they always need money! Boo.

Anyways, if you’d rather hire a third party to handle the paperwork, I recommend Northwest Registered Agent to file on your behalf.

You totally don’t have to though! In fact, their LLC services sales page pretty much outlines the steps you can take yourself. And a lot of people who offer this service professionally say it’s not hard, people like myself just don’t want to deal with it.

Also, it’s worth noting that I was told Registered Agents are useless. If you get this service for free, be sure to cancel once that year’s up.

What about the income cap for my home bakery in Maryland?

The $50,000 income cap per the state of Maryland has nothing to do with the type of business you have.

No one or entity can make more than $50,000 from selling cottage foods. If you sell other products or services, that does not count towards your income cap.

Do I need to open a business bank account for my home bakery in Maryland?

I can only tell you what I did and what my CPA advised me to do.

If you have an LLC, you can and probably should open a business bank account under that LLC. My bank also required an LLC formation in order to open a business bank account, so your bank may require the same.

If you are operating as a sole proprietor, your banking options may vary. Some banks may allow sole proprietors to open business bank accounts.

Regardless of your business structure, it is a good idea to keep your business and personal finances separate.

If you are looking to form a single-member LLC in the future, get into the habit of tracking your income, keeping receipts, and recording your business mileage.

Do I need to charge sales tax for my home bakery in Maryland?

I had a very hard time finding clear information on whether I needed to charge sales tax. And when I tried emailing, every response I got back was a literal copy and paste of the legal document that I already found and did not clearly understand!

Eventually, I was able to book an in-person appointment at my local Comptroller office in Maryland and finally got the answer to my specific situation selling cottage foods as a single-member LLC.

Based on what I sold and how I operated, I didn’t need to open a Sales and Use Tax account with the Comptroller and so I do not need to collect a 6% sales tax.

Your situation may be different, so I recommend meeting with someone at the Maryland Comptroller in-person if you’re unsure about anything.

Do I need food liability insurance to run a home bakery in Maryland?

As long as you’re following Maryland’s cottage food laws, food liability insurance is not required.

But, I highly recommend it, even if you have an LLC. Some farmers markets also require it.

Remember, an LLC will give you certain protections, but you’re not invincible.

Personally, I use FLIP because it’s affordable and a lot of home bakers in Facebook groups use it.

Concluding Part 3

And that’s everything I know so far about how to start a home bakery in Maryland!

Well, okay maybe not everything, but this is all the information I would give to myself if I had amnesia and were starting over.

If you’re looking to explore ways to sell your cottage foods, read about my experience as a farmer’s market vendor here!