All businesses are subject to certain legal requirements, whether they are a small enterprise like your home cake decorating business, or a large multi-national corporation that operates in a lot of different countries. Different regulations apply to different businesses, so let’s take a brief look at some of the things you need to be aware of and plan for.
The Taxman Whatever type or size of business you run, you will need to deal with the tax department sooner or later. I strongly recommend sooner – it is far better to find out in advance what you need to do regarding tax, instead of having to play catch up, because you can be certain that at some point the taxman will catch up with you. If you are generating income of any kind, it is subject to tax, and although the regulations and requirements are different in every jurisdiction in the world, the basic principle is the same – the government wants their cut, and they will have it.
There is no avoiding this – you may get away with it if you are only doing cakes for the occasional family function – but if you are serious about running this as a legitimate business, it is vital to gather all the relevant information before you start, and adhere to their requirements. It is in your interest in the long term – if you are paying tax on a home based enterprise you will find that many things are tax deductible, like rent or mortgage payments, electricity and telephone costs, and many other things that you may not think of as directly connected to the business.
Believe it or not, most tax departments have people who are only too willing to advise and help you with setting up a business. In my own experience the guy I talked to even told me about a lot of things I was not aware I could claim as deductions. But be warned – most tax agencies have a range of penalties that they will apply ruthlessly if you try to avoid or con them. It is not worth it in the long run – check the bankruptcy notices in your local paper and you will find that a large percentage of these are instigated by the tax department. Who would want that? If you keep accurate and up to date books, even a random, surprise audit should not create any problems or delays in the running of your business.
Health Regulations Cake decorating is part of the food industry, and as such is subject to health department regulations. It is imperative that you find out exactly what you can and cannot do in your home kitchen – the rules vary widely between local, county, state, and national jurisdictions, and these rules are enforced as strictly as tax laws, if not more so, because they pertain to public safety. Broadly speaking, food that is prepared for sale must be prepared in a registered and inspected kitchen, but in the case of cake decoration, you will find that there is quite a lot that falls out the strict definitions.
Some authorities allow certain types of icing to be prepared in a home kitchen, but not some of the more perishable ones, like buttercream for instance. Some will only allow decorating, but not baking, in which case you will need to source your cakes from an established bakery, or rent space in a commercial kitchen if you wish to make them yourself. Like tax regulations, it may seem daunting at first, and a little restrictive, but if you do your research and take advantage of the help provided by these departments before you get started, you will find that a lot of it is just common sense, and with a little experience it will become second nature. The important thing is to work with the system – not against it.
I hope you have found these suggestions helpful, and are not put off by the thought of all the red tape. Modern governmental agencies are usually fairly efficient and helpful nowadays – remember that your success is in their interest too – and keeping on top of this stuff from the beginning will then leave you free to do what you really love – making and decorating cakes that will wow everyone, even the taxman.