Baking for profit can be challenging. One if the things that can affect your bottom line is the ability to predict how much product you will be able to sell in any given day. I have to tell you that in the beginning, it is trial and error. That means there may be product that you will not be able to sell.
Accepting that there is a learning curve will make your life easier. Planning what to do with that product should just be part of your business plan. Many of the food trucks have arrangements set up with churches, food pantries, and food kitchens that feed the poor and homeless. It is a win win situation. Truth be told, you will receive more than you give for sure. Just do your homework and set up your donation channel from the beginning.
Things you should include in your business plan
This may sound like way more than you need, but I have told you all along that if you are going to start a business, no matter how small, you need to treat it like a business from the very beginning. The food truck vendors have quite an investment in their trucks, so the smart vendors take a good look at the actual expenses they will have. They have to know they are going to make a profit. Then they do all the paperwork to be legally ready to do business.
A lot of people wonder if they should apply for a tax ID # (EIN) and a business name. Well, that is not just a yes or no answer. You will have to decide what type of entity your business will be. By that I mean a sole proprietorship, LLC, S-Corp or a C-Corp. In order to do that, it is worth talking to an accountant, because there are protections and tax requirements that you need to know about. I will tell you that you need to talk to someone that is not just looking for more business for themselves. The more complicated the business structure, the more it will cost you to get your taxes filed.
Seriously, I am not an accountant, so I am not giving you tax advice, believe me, you wouldn’t want me to. The thing is, use common sense when you make this decision. If your realistic income for this business is going to be capped at $15,000, and your plans for the business is just to make extra income, my question would be how little can you do to comply? A C-Corp may be a huge overkill. Believe me, there is a lot of paperwork with any corporation. That means more money in the pocket of your accountant.
I am not telling you not to form a corporation, I am just telling you to get advice from someone you trust. If you are going to earn extra income, with no plans to expand into a full blown brick and mortar business, ask if an LLC or sole proprietorship paired with a good umbrella insurance policy will be sufficient. I don’t know the answer, remember, I am a baker, not an accountant. I am just trying to get you to think about some questions to ask.
An accountant will be able to advise you on the financial implications on the above options, and they will be able to explain some of the tax deductions that accompany each of them. You can also visit the IRS website to find some answers. Here are a couple of links to pages on that website that may be helpful;
https://www.irs.gov/publications/p535/ch07.html#en_US_2011_publink1000208919
https://taxes.about.com/od/income/qt/businessincome.htm
Steps to Start Your Business
Once you have you determined the business structure you want to operate your business under, there are other steps you need to take. I am going to briefly list them and give you some links to help you get started.
- Register the name of your business. This is referred to as a DBA (doing business as). You can decide whether you want to operate under your own name or a fictitious name. You can do that with your state government, usually the Secretary of State. You also have to check to make sure that no one else is operating under that name. Here is the link to get more information from :https://www.sba.gov/content/register-your-fictitious-or-doing-business-dba-name
- Get a tax identification number. Just like you have to pay taxes on your income, your business will have tax responsibilities too. As a matter of fact, you will have tax responsibilities at the federal, state, and possibly even local levels. You can read more about it here: https://www.sba.gov/content/getting-tax-identification-number
- Register for State and Local taxes. We all know the only sure things are death and taxes, especially if you are a business. Learn more here: https://www.sba.gov/content/learn-about-your-state-and-local-tax-obligations
- Get your Business licenses and permits. There are things like the Cottage Food Laws licenses in some states, you may need a zoning permit. You just have to find out what is required where you live. You can read more about it here: https://www.sba.gov/content/obtaining-business-licenses-permits
There is a ton of information on the IRS website, but after reading it for awhile, your eyes may go crossed! I just gave you links to some of the pertinent info to get you started. Hope it helps. Please leave any comments or questions.
