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A great bakery can quickly become a local favourite — even attracting visitors from far and wide. Whether it’s savoury sourdoughs and quiches or sugary delights to satisfy sweet cravings, bakeries often draw people in search of their next indulgence.
If you’ve been dreaming of sharing your baking talents with the world, why not turn your passion into a profitable business? However, just like crafting the perfect treat, starting a bakery requires careful attention to detail and the right mix of ingredients. To give your bakery the best possible start, it’s essential to begin with the legal side of business.
How Do I Start A Bakery Business From Home?
Your bakery doesn’t necessarily need to operate from a brick-and-mortar store. The startup costs for renting a storefront can be quite high, and you might want to test the waters before making such a significant commitment.
Starting your bakery business from home is a great alternative, but there are several key factors to consider:
- Zoning Requirements: Do your local zoning laws allow you to run a bakery business from home?
- Accessibility: Will customers be able to easily access your location?
- Appropriateness of Home Space: Is your home space suitable for a commercial bakery? Keep in mind that there are specific food safety standards you must adhere to.
- Kitchen Facilities: Will you prepare orders in a commercial kitchen or in your home kitchen?
- Delivery and Distribution: Will customers pick up orders from your home, or will you offer home delivery or ship goods via post?
- Product Selection: What types of baked goods will you sell? For example, cookies are easy to ship, but posting a quiche might not be the best idea.
Once you’ve carefully considered these factors and ensured it’s legally viable to run a bakery business from home, you can begin planning your next steps.
Creating a comprehensive business plan during this stage is highly recommended. It will help you stay organised and manage the various aspects of starting your bakery business.
Whether you decide to operate from home or a traditional storefront, every bakery has the same humble beginning—registering the business with the appropriate authority.
Registering A Bakery Business: Sole Trader Or Company?
When registering your bakery business, you will need to determine the type of business structure your bakery will have. The most commonly registered structures are a sole trader, partnership and company. Each business structure has their own drawbacks and advantages, here’s a quick summary of what you need to know.
Sole Trader And Partnership
Sole trader and partnership businesses differ primarily in terms of ownership. Sole trader businesses are for individuals who want to be the sole owner and generally the sole operator of their business. Partnerships, on the other hand, are for individuals who want to share ownership and responsibilities with one or more partners.
Despite these structural differences, sole trader and partnership businesses are quite similar when it comes to registration and legal protection. They are registered in similar ways and offer the same level of legal protection. As a result, their pros and cons are largely the same.
Pros:
- Easy to register: You simply need to apply for an Australian Business Number (ABN), which can be done online.
- Business name registration: If you are using a name other than your personal one, you will need to register a business name.
Cons:
- No legal separation: There is no distinction between you and the business, meaning you will be personally liable for the entire business.
- Risk to personal assets: If the bakery business faces financial or legal difficulties, your personal assets could be at risk.
Company
A company structure differs significantly from sole trader and partnership businesses. A company is a separate legal entity, meaning it exists independently of you. This allows the company to own property, earn profits, and incur debt in its own name—offering you the benefit of limited liability protection. For serious business ventures, a company is often the recommended structure. However, it can be more complex to establish. Below, we’ve outlined some pros and cons of setting up a company.
Pros:
- Limited liability protection: Minimises the risk of your personal assets being impacted if your business faces financial or legal trouble.
- Expansion opportunities: A company structure is better suited for growth and scaling in the future.
- Attractive to investors: Companies are often more appealing to potential investors.
Cons:
- Time-consuming and costly: Setting up a company requires more time and financial investment compared to other structures.
- Increased regulation: Companies are subject to stricter compliance and reporting requirements (however, this also enhances their credibility and trustworthiness).
Setting up a company involves registering with ASIC, creating the necessary legal documents, appointing shareholders and directors, and complying with the relevant regulations. While the process can seem daunting, a company structure offers legal protections that sole trader and partnership structures do not, significantly reducing the risks of starting a bakery business.
For peace of mind, it’s best to seek the assistance of a legal expert when setting up your company. They can handle the complexities and ensure everything is completed correctly, allowing you to focus on launching your bakery with confidence.
Do I Need Any Contracts To Run A Bakery Business?
Once your bakery business is registered, it’s time to consider the contracts your bakery will need. Don’t make the mistake of delaying or skipping this step—contracts are crucial for providing essential protection for your business. From ensuring timely payments to guaranteeing reliable supply deliveries, well-drafted contracts are vital for smooth bakery operations. It’s wise to have them prepared by a legal expert in a timely manner. Here are some key legal documents to consider:
Supply Agreement:
As a bakery business, having the right supplies delivered on time is critical. A well-drafted supply agreement ensures clear terms with your suppliers regarding delivery schedules, quality standards, and payment obligations.
Employment Agreement:
Managing a bakery on your own can be overwhelming, so hiring staff may become necessary. Every employee should have an employment agreement outlining their rights and responsibilities, including job roles, wages, leave entitlements, and confidentiality obligations.
Workplace Policy:
Proper workplace conduct is vital in a bakery, as you’re handling food. Comprehensive workplace policies tailored to your bakery can help set clear expectations, provide staff training guidelines, and ensure compliance with food safety regulations.
Privacy Policy:
If your bakery has a website that collects personal information from users—such as for online orders or mailing lists—you must have a privacy policy that complies with Australian privacy laws. This ensures transparency and protects your customers’ data.
Non-Disclosure Agreement (NDA):
Have secret recipes or sensitive business matters? An NDA helps protect your bakery’s confidential information by legally binding others to maintain privacy. This is especially important when dealing with contractors, staff, or third-party collaborators.
What Laws Do I Need To Follow When Starting My Own Bakery Business?
Another significant factor to consider when starting your own bakery business is legal compliance. Following the relevant laws and regulations can keep your business out of trouble and help it build a positive reputation in the community. The specific laws that will apply to your bakery business may differ depending on individual factors, so it’s always a good idea to get tailored advice from a legal expert when it comes to legal compliance. For now, we’ve listed a few regulations you may want to consider.:
- Food Safety Standards: Compliance with food safety standards, such as the FSANZ Code, is critical for your bakery. These regulations outline how food must be handled, stored, and prepared to ensure it meets safety requirements.
- Employment Law: When hiring employees for your bakery, it’s important to uphold their legal rights. This includes providing a safe working environment, paying at least the minimum wage, and ensuring fair working conditions.
- Licensing and Permits: Running a bakery may require specific licences and permits, which are typically managed by local or state authorities. It’s essential to do your research and obtain the necessary approvals.
- Data & Privacy Law: Collecting customer information during transactions obligates your business to protect this data. You must comply with privacy laws by taking reasonable steps to secure personal information.
- Intellectual Property (IP) Law: Distinguishing your bakery with a unique logo or business name is important. Protect these assets by registering a trade mark and ensuring you’re not infringing on someone else’s IP.
Key Takeaways
Starting a bakery business is a fantastic opportunity to share your culinary creations with the world, but it’s crucial to prioritise the legal aspects of launching and running your own business. To summarise what we’ve discussed:
- Starting a bakery business requires careful planning, including deciding whether to operate from a home kitchen or a brick-and-mortar store, while adhering to zoning laws and food safety standards.
- Creating a business plan helps you stay organised, assess feasibility, and ensure smooth execution of your bakery operations.
- Choosing the right business structure, such as sole trader, partnership, or company, is essential for managing liability, scaling opportunities, and aligning with long-term business goals.
- A company structure, while more complex and regulated, offers benefits like limited liability, growth potential, and attractiveness to investors, making it ideal for serious bakery ventures.
- Securing well-drafted contracts like supply agreements, employment agreements, workplace policies, privacy policies, and NDAs protects your bakery’s operations and sensitive information.
- Compliance with laws such as food safety standards (FSANZ), employment law, licensing and permits, data privacy laws, and intellectual property laws is crucial to operate legally and avoid penalties.
- Consulting a legal expert ensures that all legal aspects, from registration to contracts and compliance, are handled correctly, giving your bakery a strong foundation for success.
If you would like a consultation on starting a bakery business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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