Before you start a home-based food business in Texas, you need to consider some basic legal issues. For example, you must know which foods you are allowed to prepare in your home kitchen, choose a business structure, understand how your business is regulated, learn about food safety, and obtain insurance. If you want to hire employees, you need to know the rules about that, too.
This article will get you started. To learn more about running a home-based business, see Nolo's section on Your Home Business.
In Texas, beginning on September 1, 2013, you may register your home kitchen to make the following food products for sale:
- baked goods that don’t need to be refrigerated, such as breads, cookies, cakes, and pastries
- candy, such as chocolate, toffee, or nut brittle
- coated and uncoated nuts
- unroasted nut butters
- fruit butters
- canned jams and jellies
- fruit pies
- dehydrated fruits and vegetables, including dried beans
- popcorn and popcorn snacks
- cereal, including granola
- dry mixes
- cucumber pickles
- roasted coffee or dried tea, and
- dried herbs or herb mixes.
Choosing a Business Structure
Many home-based food businesses are intended to be small. Texas limits the amount of money a home-based food business can earn to $50,000 per year. (Texas Health & Safety Code § 437.001.)
If your business is very small, running it as a sole proprietorship may be the only economically viable option. Keep in mind, however, that as a sole proprietor, you are personally responsible for every aspect of the business – from paying taxes to absorbing the risks of a lawsuit if your food products cause illness or injury to a customer. If you operate as a sole proprietor, you should purchase liability insurance to protect your personal assets (see below).
If you can afford it, consider choosing a business entity that protects you from personal liability, such as a limited liability company or corporation. These business structures ensure that your food business, not you personally, would be responsible for any damage if someone were sickened or otherwise harmed by your product.
For more information, see Choose Your Business Structure.
Permits and Regulations
You do not need a permit from the local health department to start a home-based food business in Texas. In fact, the health department is prohibited from interfering with your cottage food business unless a customer files a complaint. (Texas Health & Safety Code § 437.0192.)
To run a cottage food business, you must follow the guidelines of the state cottage food law, which allows you to sell food only from the following locations:
- directly from your home
- by direct delivery to customers
- at a farmer’s market or farm stand, or
- at a municipal, county, or nonprofit fair.
You are not allowed to sell at privately sponsored events such as craft fairs or flea markets, nor are you allowed to sell wholesale, through the Internet, or by mail.
To operate a home-based food business in Texas, you must complete a food safety training course and obtain a food handler’s card. (Texas Health & Safety Code § 437.0195.)
In addition, the food you sell must be packaged in a way that prevents contamination (there are exceptions for large items like wedding cakes) and be properly labeled. Your labels must include:
- the name and address of your cottage food business
- the common or usual name of the product
- a list of any major food allergens contained in the product, and
- a statement that the food is made in a home kitchen and is not inspected by the Department of State Health Services or a local health department.
There are unique risks associated with food businesses, from food-borne illnesses to foreign objects like glass or plastic in food. These are added to typical business hazards such as fire, theft, or an employee who slips and falls on the job. Don’t assume that your homeowners or renters insurance policy will cover your home business operations; it probably won’t. You must carefully evaluate your existing policies and then contact a qualified insurance agent to purchase the additional insurance you’ll need.
To find a good insurance agent, ask other food-business owners for recommendations. Look for an agent who has experience writing policies for food businesses and make sure all major risks are covered. General commercial liability insurance should cover everything from an employee who is burned by boiling water to a customer who gets sick from eating your food.
If you use a car or truck for deliveries or other business travel, be sure it is also properly insured.
In Texas, other members of your household may help you with your cottage food business. You are also allowed to hire employees. If your employees are not directly supervised by you, they must obtain a food handler’s card. (Texas Health & Safety Code § 437.0195.)
If you decide to hire an employee, you should learn about basic employment law issues such as hiring rules, how to avoid discrimination, and how to handle money matters like taxes and workers compensation.
For more information, see Nolo’s Human Resources Law Center.