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How to Start a Bakery (Home or Storefront) in Illinois

Many bakeries start at home and move to a commercial kitchen or storefront once demand is proven. What you can sell from a home kitchen, and where, is set by your state's cottage food law and varies widely. A storefront bakery is a food-service business with health permits, inspections and a commercial lease.

Reviewed November 5, 2026 · Sources linked inline

Illinois requirements for this business

  • Illinois cottage food operators must register with the local health department where they reside, and products may not be sold for resale or in retail food establishments. [source]
  • Cottage food must be made in the operator's primary domestic residence kitchen or another appropriately designed kitchen on a farm, and packaged with ingredient and allergen labeling. [source]
  • IDPH's cottage food guide says registration fees are capped at $50 by law and operators must complete Certified Food Protection Manager certification before approval. [source]
  • Labels must state: "This product was produced in a home kitchen not inspected by a health department that may also process common food allergens." [source]
  • The guide says there is no cottage food sales cap, online sales are allowed within Illinois, and products may not be shipped out of state. [source]

Statewide steps for every Illinois business — forming an LLC or registering a business name with the State of Illinois — are on our state licensing directory.

FirstBizGuide is not a government agency: any license or registration fees are paid directly to the agency named in each source. These are the Illinois facts we have verified so far, not a complete list. City and county rules vary — check with your local government before opening.

Startup costs

We haven't found a reliable published cost range for this business, so we don't show one. Costs vary widely by market, equipment and whether you buy new or used. Plug your own quotes into the worksheet:

Open a bakery cost worksheet →

SBA 7(a) loans in this industry

Retail Bakeries (NAICS 311811): 557 loans approved in FY2024–FY2026. Median loan $174,500; middle half $50,000–$500,000.

Loan size is not startup cost — these loans also fund acquisitions, real estate and working capital. Full breakdown and caveats →

How much competition is there?

Census industry: Retail Bakeries (NAICS 311811)

In Illinois: 432 employer establishments (2023) and 1,106 businesses without employees (2024). Nationwide: 9,219 employer establishments (2023) and 37,239 businesses without employees (2024).

The count of businesses without employees is for the broader Census group “Bakeries and Tortilla Manufacturing” (NAICS 3118), so it includes related businesses, not only this one.

See counts for your county → Counts aren't a measure of saturation — see the caveats on the tool page.

Equipment and supplies

  • Stand or floor mixer sized to your batches
  • Oven(s) — home kitchen under cottage food rules, commercial for a storefront
  • Sheet pans, cooling racks and storage
  • Scale, thermometers and measuring tools
  • Packaging and labels with ingredients and allergens
  • Display case (storefront)

Licenses and registration

  • If you bake at home to sell, check your state's cottage food law: it decides which foods are allowed, where you can sell and what labels must say.
  • Selling outside cottage food limits usually requires a licensed commercial kitchen and a health permit from your county or city.
  • Food handler or manager certification is commonly required.
  • If your state taxes your products, register to collect sales tax; register an LLC or trade name if you use one.
  • A storefront needs zoning approval, health inspections and any local business license your city requires.
  • Get a free Employer Identification Number (EIN) from the IRS if you will hire employees or form an LLC or corporation. Beware of sites that charge for this. [source]
  • Register an LLC or corporation with your state's business registration office (sole proprietors usually register a trade name/DBA instead). [source]

Insurance to consider

  • General liability with product liability
  • Business property coverage (storefront)
  • Workers' compensation once you hire
  • Event or vendor coverage for farmers markets

Get quotes from several carriers or an independent agent; coverage needs depend on your contracts, state and staff.

Financing options

  • SBA 7(a) loans — the SBA's main guaranteed loan program, made through participating lenders. [source]
  • SBA Microloans — smaller loans delivered through nonprofit intermediary lenders. [source]
  • SBA Lender Match — a free tool that connects you with interested SBA lenders. [source]
  • Free counseling from your local SBDC or SCORE chapter can help you build the business plan lenders ask for. [source]

Estimate payments with the loan calculator, then check runway with the cash flow projection.

Ongoing operating expenses

  • Ingredients
  • Packaging
  • Kitchen rental or rent
  • Utilities
  • Labor
  • Insurance
  • Card fees and marketing

Use the break-even calculator to see how many jobs or sales cover them.

Common mistakes

  • Selling foods your cottage food law doesn't allow
  • Labels without ingredients and allergens
  • Pricing without counting your time
  • Signing a storefront lease before demand is proven
  • Too large a menu

Finding customers

  • Farmers markets and pop-ups
  • Custom orders for birthdays, weddings and offices
  • Instagram photos of every order
  • Wholesale to coffee shops

Startup checklist

Ticks are saved on this device and appear on My plan.

Compare with other businesses

Sources