How to start a bakery business

Step 1: Decide on your bakery format

The design and layout of your bakery set the tone for how customers experience your brand. From the look and feel of your space to its functionality, these decisions shape your reputation in the community. Select a format that suits your budget, aligns with your vision, and helps you differentiate yourself from local competitors. Options include:

• Counter-only bakery: Counter-only bakeries forgo seating, offering a single counter for ordering and picking up baked goods
• Bakery cafe: Bakery cafés pair baked goods with drinks like coffee, smoothies, and tea—served for dine-in or counter service
• Dine-in bakery: Dine-in bakeries work well for larger spaces, offering tables and seating where customers can relax, socialize, or even get some work done
• Food truck or pop-up shop: Bakeries can reach customers on the go using food trucks, pop-up stands, or by selling at farmers’ markets and community events.

Step 2: Write your business plan

A business plan is essential for starting a bakery. It outlines the type of bakery you want to open, its structure, the products you’ll sell, marketing strategies, and financial projections. A complete bakery business plan typically includes seven main sections.

For more information, see  What are the elements of a business plan? 

Step 3: Obtain loans and startup capital

Starting a bakery typically costs between $10,000 and $50,000, depending on the type of bakery, its location, equipment requirements, staffing needs, and menu offerings. Key expenses include leasing a commercial space, insurance, kitchen equipment, staffing and training, inventory, and utilities. Be prepared to cover several months of costs, as it may take time for your bakery to become profitable.

If you don’t have enough capital, you may need a loan. Common options include:

• Traditional commercial loan: Offers large amounts of capital at lower interest rates but usually requires a strong credit score and can take months to access.
• Business line of credit: Provides access to a set amount of funds; you only pay interest on what you use and can reuse the line as you repay it.
• Small business loan: Supported by the Small Business Administration (SBA), these loans are designed for small businesses, often with lower interest rates and eligibility for those with borderline credit.

Step 4: Decide on where to open your bakery

When choosing a location for your bakery, accessibility is key. Look for a location close to your suppliers and target customers, and ensure it has good visibility and steady foot traffic. A well-chosen location can help attract more visitors and set your bakery up for success, no matter what type of bakery you’re opening.

Step 5: Decide on a name for your bakery

Your bakery’s name is often the first impression customers will have and a key part of your brand. Consider the following when choosing a name for your bakery:

• A great name should be creative, memorable, and aligned with the products you plan to offer.
• Before finalizing a name, check that it’s available and comply with any legal rules for naming your business entity, especially if you plan to form an LLC or corporation.
• If you plan to operate under a name different from your legal entity, consider registering a “Doing Business As” (DBA).

Take your time choosing a name for your bakery. It’s a decision that can shape your brand identity and influence your business’s long-term success.

For more information, see How to register a business name for your LLC 

Step 6: Choose a business structure for your bakery

The way you structure your bakery affects taxes, liability, and day-to-day operations. Selecting the right entity helps strike a balance between legal protection and operational benefits. Common structures for bakeries include:

• Sole proprietorship: Simple to set up and fully controlled by the owner, but the owner is personally liable for business debts and legal issues. It offers ease of management but limited financing options and potential difficulty attracting investors.
• General partnership: Formed when two or more individuals run a business together for profit. Like a sole proprietorship, partners have unlimited personal liability for business debts.
• Limited liability company (LLC): Provides limited liability protection, keeping personal assets safe from business debts, while allowing pass-through taxation.
• Corporation: A separate legal entity owned by shareholders, shielding owners from personal liability for business debts and obligations.

For more information on business entity structures, read Comparing company types.

Step 7: Order your bakery equipment

The equipment your bakery needs depends on what baked goods you want to make. While the equipment may differ based on the size and focus of your bakery, all bakeries need to cover a few key areas:

• Mixing tools: Key tools include commercial mixers, kneading tables, dough dividers, sheeters, and scales.
• Storage: Organize your kitchen with shelving, racks, and carts to handle bulk ingredients like flour and sugar.
• Equipment: Convection ovens provide even baking for most products, while deck ovens are ideal for artisan bread. High-output bakeries may require roll-in rack ovens or revolving ovens.
• Cleaning up: A three-compartment sink is central to your cleaning station, complemented by hand-washing stations, gloves, cleaning chemicals, sponges, scrubbers, and other essentials.

Step 8: Hire and train bakery staff

The size of your bakery staff depends on how big your business is and what type of bakery you have. A small, local bakery usually has a simple setup. Retail bakeries need front-of-house staff to take orders and handle the cash register, while most workers prepare the baked goods behind the scenes.

It’s essential to have one or two staff members with training or experience to oversee the baking process. You can also hire unskilled workers for tasks such as cleaning, mixing ingredients, packaging products, and other duties that don’t require specialized skills.

Step 9: Understand the legal requirements of your bakery business

Your bakery business may need to comply with different legal requirements depending on your business type and location. Typical requirements include:

• Licenses and permits: The food service industry has many rules at the federal, state, and local levels. To start your baking business, you will need certain bakery licenses and permits. The specific permits required vary based on your location. Check your local laws and regulations to see what applies to your business.
• Sales tax: Registering for taxes is a crucial step in starting your bakery. Along with federal taxes, you also need to know about state and local tax requirements. Research the tax rules in your state and contact the right state and local tax offices to learn how to register.
• DBA filing: If you intend to do business under an assumed name (also known as a trade name or fictitious business name), a DBA filing must be made with either the state or local jurisdiction. 
• Obtain an EIN: If hiring employees, you need to obtain an EIN, register with the Department of Labor in your state, and handle payroll. You will also need an EIN if you form an LLC or corporation. 

For more information, see What are the legal requirements for starting a small business? 

Step 10: Open a business bank account and credit card

Maintaining a separate business bank account and credit card is key to keeping your personal and business finances separate. It also helps you build business credit and protect your personal assets if there is a legal issue with your business.

Step 11: Obtain the insurance that is best for your bakery business

Forming your business as an LLC or corporation can help shield your personal assets in some situations. However, this does not protect your business from possible risks.

The insurance needs and costs for your bakery will vary depending on factors such as your location, business size, and the services you offer. There are several important types of insurance that every bakery should consider.

• General liability insurance: Protects your business in the event that it causes injury to someone.
• Commercial property insurance: Covers your business equipment if it is lost or damaged due to events beyond your control.
• Cyber liability insurance: Data breaches are not just a concern for large corporations; over 60% of small and medium-sized businesses faced a cyber threat in the past year alone.
• Workers' compensation: In most states, Workers' Compensation insurance is required once you hire a specific number of W-2 employees. Even if it’s not mandatory, having Workers' Compensation can provide valuable protection for both employees and employers.

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BizFilings is committed to simplifying the business startup process, so you can focus on what you enjoy. For additional details, refer to our state guides for LLCs and corporations.