How to Start a Bakery in California

California gives you something most states won’t: a real business on-ramp that starts in your own kitchen. Before you sign a commercial lease or spend $80,000 on deck ovens, you can legally sell baked goods to customers, farmers markets, and even retail stores — all from home, under the state’s Cottage Food Operations law. That’s a genuinely unusual option, and it’s worth understanding before you commit to anything bigger.

This guide covers two distinct paths: the cottage food route (home-based, low-cost, surprisingly capable) and the full commercial bakery route (licensed kitchen, county health permit, the whole stack). Most bakers should start with the first. Some will eventually move to the second. A few will stay home-based forever and do just fine.

Why Start a Bakery in California?

California’s food culture is real, not marketing copy. The demand for artisan bread, gluten-free options, vegan pastries, organic ingredients, and specialty dietary products is higher here than almost anywhere else in the country. That’s not an accident — it’s a market condition you can build a business around.

The business models are varied enough to match almost any lifestyle. You can sell directly at a farmers market on weekends. You can wholesale sourdough to local cafes. You can run a retail storefront with a full display case. You can do custom cake orders online and deliver them yourself. Or you can do all of these at different stages of growth.

Revenue varies wildly by model. Home-based and small cottage food operations typically gross $50,000–$150,000 per year. A commercial storefront with foot traffic can hit $500,000–$2,000,000+ annually. Neither number is guaranteed, but the range tells you something: there’s a real ceiling here if you want to scale, and a viable floor if you want to stay small.

The cottage food law is the part most aspiring bakers overlook. It’s not a hobby exemption — it’s a legitimate business path with caps up to $175,000 per year. Start there, build your customer base, and you’ll have actual data before you ever sign a commercial lease.

Path 1: Cottage Food Operation (Home-Based Bakery)

This is where most California bakers should start. The Cottage Food Operations (CFO) law — originally AB 1616, expanded by AB 1144 — lets you make and sell certain food products from your home kitchen without a commercial license, without a kitchen inspection (for Class A), and with almost no upfront cost.

What You Can Sell

The approved product list covers most of what home bakers actually make. Breads, cookies, cakes, pastries, brownies, muffins, granola, candy, and dried fruit all qualify. The governing principle is non-potentially-hazardous — meaning the product is shelf-stable at room temperature and doesn’t require refrigeration to stay safe.

That’s the line that matters. Cross it and you’re out of cottage food territory.

Anything requiring refrigeration is not allowed under cottage food. No cream cheese frosting. No custard-filled pastries. No cheesecake. Meat products are out. Canned goods are generally out unless you’re following specific approved processes. A classic chocolate chip cookie? Fine. A Boston cream pie? Not under cottage food.

Class A vs. Class B

Class A is the simpler registration. You can sell directly to consumers — at your front door, at farmers markets, through your own website with direct delivery. The annual revenue cap is approximately $88,000 (2026, inflation-adjusted from the original $75,000 base). You register with your county environmental health department, the fee is typically free or minimal, and no kitchen inspection is required.

Class B opens up indirect sales. You can sell through stores, third-party retailers, and restaurants. The revenue cap jumps to approximately $175,000 (2026, inflation-adjusted from $150,000). You need a permit from county environmental health rather than just a registration, and your home kitchen will be inspected.

The inflation adjustment is unusual — most states fix these caps in statute and never revisit them. California adjusts annually, which means the caps are meaningfully higher than they were when the law originally passed. Check your county for the current applicable numbers.

Labeling Requirements

Every cottage food product you sell needs a compliant label. Not optional, not “recommended.” Required.

Your label must include:

The statement “Made in a Home Kitchen” (exact wording)
Full ingredient list
Allergen warnings (per federal labeling requirements)
Your business name and home address
A “Best By” date

The allergen piece is where people get sloppy. Tree nuts, peanuts, dairy, eggs, wheat — if it’s in the product, it’s on the label. One missed allergen disclosure and you have a liability problem that no insurance policy will fully fix.

Food Safety Training

You and any household members who help with production need to complete an approved food safety course. It’s available online, runs about $10, and requires renewal every three years. This isn’t onerous — but it is required, and skipping it means your operation is technically unlicensed.

Do You Need a Seller’s Permit?

Most cottage food sales to end consumers are exempt from California sales tax — food sold for home consumption is generally not taxable. But this depends on your specific products and sales channels. If you’re uncertain, check with the California Department of Tax and Fee Administration (CDTFA) before assuming you’re covered.

Path 2: Commercial Bakery

At some point, cottage food stops fitting. Maybe you hit the revenue cap. Maybe you want to sell croissants with pastry cream (refrigerated — not cottage food eligible). Maybe a restaurant wants to order 200 loaves a week. When any of those things happen, you need a licensed commercial operation.

County Health Permit

Every commercial food facility in California needs a county health permit. This is issued by your county’s environmental health department, not the state. Annual fees run $300–$1,500+ depending on your county and the size of your operation. Los Angeles County, Alameda County, and San Diego County all have their own fee schedules — look up yours specifically at CalGold, the state’s permit lookup tool.

Plan Check

Before you build out or modify any commercial kitchen space, you need to submit plans to county environmental health. Floor plans, equipment lists, plumbing details — the full package. Plan check fees typically run $200–$600+. Do this before construction. Retrofitting a non-compliant kitchen after the fact is expensive and painful.

CDPH Processed Food Registration

California commercial bakeries — including any facility doing commercial food processing — must register with the California Department of Public Health (CDPH). The Processed Food Registration (PFR) costs $100 per facility as a food safety fee. This is separate from your county health permit. You need both.

CalCode Compliance

Your kitchen must comply with the California Retail Food Code (CalCode), which governs everything from handwashing stations to surface materials. Minimum requirements include:

Dedicated handwashing sink (not your prep sink, not your three-compartment sink)
Three-compartment sink for washing, rinsing, and sanitizing equipment
Adequate refrigeration for any perishable ingredients or products
Proper ventilation, especially for baking equipment
Food-grade surfaces throughout

CalCode is enforced by county environmental health during inspections. Violations result in correction orders, re-inspection fees, or permit suspension in serious cases.

Shared Commercial Kitchens

If you’re not ready to build your own space, shared commercial kitchens (also called commissary kitchens or cloud kitchens) let you rent a licensed, CalCode-compliant kitchen by the hour or month. Hourly rates run $15–$40/hour. Monthly memberships typically cost $1,000–$3,000/month depending on location and access hours.

This is a legitimate middle path — especially in the Bay Area and Los Angeles where commercial space is expensive. You get a licensed facility without the buildout cost, and you can scale your rental as your volume grows.

Step 3: Business Structure

You can operate as a sole proprietor, which requires no state filing and no $800 annual franchise tax. Many cottage food bakers start this way intentionally — the $800 Franchise Tax Board minimum hits every California LLC every year, regardless of revenue. If you’re clearing $30,000 in your first year, absorbing $800 just for the privilege of having an LLC stings.

When you’re ready to form an LLC, the Articles of Organization cost $70, filed at bizfileOnline.sos.ca.gov. From that point forward, you owe $800/year to the Franchise Tax Board — due by the 15th day of the 4th month after formation, then April 15 annually. There is no first-year exemption anymore; AB 85 expired December 31, 2023.

A few other registrations:

CDTFA Seller’s Permit: Required for commercial bakeries selling tangible goods. Free to register at cdtfa.ca.gov. California’s base sales tax rate is 7.25%, with local additions depending on your city or county.

EIN: Get one from the IRS at irs.gov. Free. Takes about 10 minutes online. You need it to open a business bank account and to hire employees.

Step 4: Local Permits and Zoning

The state-level permits are only part of the picture. Cities add their own layer.

City business license: Most California cities require one. Fees range from $15 to $300+ depending on the city and your revenue. This is sometimes called a business tax certificate. Check your city’s finance or business services department.

Zoning for cottage food: Most residential zones in California allow cottage food operations — the state law preempts local restrictions to a significant degree. But some cities have added their own requirements on top. Check your local zoning code before you start, especially if you plan to have customers pick up from your home.

Commercial storefronts: Must be in a commercially zoned area. Any kitchen buildout or remodel requires building permits in addition to the plan check from county environmental health. Budget time for both — these processes often run in parallel but don’t always move at the same pace.

Farmers market sales: Selling at a farmers market involves two layers. The market organizer typically requires a vendor permit application (fees and requirements vary by market). County environmental health may also require a separate permit for temporary food facility sales. Contact both the market manager and your county health department before your first market date.

Step 5: Food Safety and Insurance

Food Handler Card and Manager Certification

All employees need a California Food Handler Card within 30 days of hire. Cards run $7–$10 online through an approved provider. As of January 1, 2024, employers must cover the cost of training and testing, and provide two hours of paid leave for employees to complete the certification.

Commercial bakeries must also have at least one certified Food Safety Manager on staff — someone who has passed a proctored exam (ServSafe is the most common provider). That certification is valid for five years.

Cottage food operations don’t require the manager certification, but you do need the food safety training course mentioned earlier.

Insurance

General liability: Not legally required, but practically essential. A good GL policy for a food business covers product liability — meaning if a customer has an allergic reaction or gets sick, you have coverage. Expect to pay $500–$1,500/year. Verify explicitly that your policy covers food products, not just premises liability.

Home-based business: This catches people off guard. Your homeowner’s or renter’s insurance almost certainly does NOT cover business activities. If you operate a cottage food business from home and a customer slips on your front step picking up an order, your personal policy may deny the claim. Add a home-based business rider to your existing policy, or get a separate business owner’s policy.

Workers’ compensation: Mandatory the moment you hire anyone. California has no minimum employee threshold — one employee triggers the requirement. Penalties for non-compliance start at $10,000.

Startup Costs at a Glance

Setup	Estimated First-Year Cost
Cottage Food, Class A (sole proprietor)	$100–$500
Cottage Food + LLC	Add $870 ($70 filing + $800 franchise tax)
CDPH Processed Food Registration	$100
County health permit	$300–$1,500/year
Commercial bakery (shared kitchen)	$5,000–$15,000/year
Commercial bakery (own space buildout)	$50,000–$200,000+
Insurance (general liability)	$500–$1,500/year

The honest version of these numbers: cottage food is genuinely cheap to start. A few hundred dollars, some time at the county health department, and you’re legal. The commercial route is a different scale of commitment entirely — and the shared kitchen option exists precisely to bridge that gap.

Where to Start

If you’re reading this and haven’t sold a single baked good yet, start with Class A cottage food. Register with your county environmental health department, take the food safety course, get your labels right, and sell to real customers. Find out what sells, what price points work, and whether you actually want to do this at scale.

If you’re already selling and bumping against the revenue limits — or you want to expand into products that require refrigeration — then the commercial path is your next move. Start by contacting your county environmental health department and running your permit requirements through CalGold.

The infrastructure comes after you’ve proven the product.