Before you start a home-based food business in New York, you need to consider some basic legal issues. For example, you must know which foods you are allowed to prepare in your home kitchen and how to choose a business structure, apply for permits and licenses, 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 New York, you may apply for a "home processing exemption" that allows you to make the following food products in your home kitchen:
You are not allowed to make:
You can find this list and more information about the foods you can legally prepare in a home kitchen by visiting the website of the New York Department of Agriculture and Markets.
Many home-based food businesses are intended to be small. Unlike many states, New York does not set a limit on the amount of money your cottage food business may earn in a year, but the restrictions on what you can make and where you can sell (see below) are likely to constrain your income.
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.
To start a home-based food business in New York, you must apply for an exemption to the licensing laws that usually apply to food manufacturers. This exemption is commonly called a "home processing exemption" or "20-C exemption." You can download the application from the website of the New York Department of Agriculture and Markets.
If your home is on a private water system, your water must be tested for potability and you must include the results of the test with your application. Your kitchen is also subject to inspection by the Department of Agriculture.
If your exemption is approved, there will be a number of restrictions on how you may operate, including the following:
In addition, before you launch your venture, you should check with your city or town to be sure that local zoning laws allow you to run a business from home.
To operate a home-based food business in New York, you must follow the rules of safe food handling and processing described in the relevant publications listed on the Good Manufacturing Practices page of the New York Department of Agriculture website.
In addition, there are certain rules that apply only to home processors, including:
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.
New York's home processors law does not prevent you from hiring employees to work in your home kitchen, but you should check with your local zoning authorities to find out whether employees are allowed and, if so, how many you may hire.
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.