How to Start a Bakery Business in Texas: A Founder's Guide

Most bakeries start the same way: friends ask where to buy the cake, the orders pile up, and suddenly a hobby needs a business. In Texas that transition is easier than in almost any other state — but it still means rules, paperwork, and real costs. Here's the order that works.

Step 1: Start at home under the cottage food law

Texas cottage food law (Health & Safety Code, Chapter 437) lets you sell food made in your home kitchen directly to consumers — no state permit, license, or inspection, and cities and counties can't require one either. Since September 1, 2025 (Senate Bill 541), the annual gross income cap is $150,000, adjusted yearly for inflation, and almost any food is allowed except a short prohibited list (meat, seafood, ice cream, low-acid canned goods, CBD/THC products, and raw milk). Two things you do need: an accredited food handler course before you sell, and a label on every package with your name and address (or a DSHS registration number), the product name, allergens, and the state-mandated home-production statement. Refrigerated foods are allowed only if you register with DSHS and follow temperature and labeling rules. One hard limit: no shipping — orders must be delivered in person by you or someone in your household.

Step 2: Set up the business properly

Form an LLC with the Texas Secretary of State (Certificate of Formation, Form 205) — it separates your personal assets from the business and looks professional to buyers. Get an EIN from the IRS (free, online), open a business bank account, and keep every bakery dollar in it. Our step-by-step guide to opening an LLC in Texas covers the full process. On sales tax: plain baked goods sold to go are generally exempt in Texas, but candy and confections are taxable — if you sell taxable items, you need a sales and use tax permit from the Texas Comptroller.

Step 3: Price like a business, not a hobby

Home bakers undercharge more than any other founders we meet. Price every item from real numbers: ingredients, packaging, your time at a real hourly rate, delivery, and a margin — not just "what feels fair." A cake that costs $18 in ingredients and three hours of your time is not a $35 cake. Track costs per recipe from the start — when you move to a storefront, those numbers decide your menu.

Step 4: Brand it before the storefront

Your brand turns one-time buyers into regulars: a name customers remember, packaging that photographs well, a consistent look on Instagram and your order page. When we branded Sweet Moon, a bakery, the packaging did half the marketing — customers posted the box before they tasted what was inside. See our guide to branding for a bakery for the full playbook, and plan your packaging early — it shapes your costs, your photos, and your unboxing experience.

Step 5: Graduate to a commercial bakery

Moving out of the home kitchen means a commercial space, a local health permit and inspection, and real equipment costs — oven, mixers, refrigeration, and a point-of-sale system. Budget for rent, build-out, and at least three months of operating costs. The cottage food years should have built the customer base that makes the storefront viable from week one.

This article is general information, not legal or tax advice. Laws change — confirm current requirements with DSHS, the Secretary of State, and the Comptroller, or talk to a CPA or attorney first.

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