Cake Business: Insurance and LicensingPosted 03/05/2010 by Mary Horgan
For the successful cake baking business, staying legal is vital. Complying with relevant insurance and licensing requirements is fundamental to playing by the rules. For many cake baking enthusiasts, however, details of the licensing and insurance needs of small businesses may be unfamiliar. This article outlines the basic requirements for small businesses making and working with food products. You might also want to take a look at our sister site Insuring It where there is a good article discussing home business insurance.
What Are The Insurance Requirements?
First things first, whilst it is not mandatory, it is advisable to insure your business premises. Most standard contracts will insure you against risks including floods, storms and lightening, fire, riot damage and damage called by vandalism. If you are a tenant, you should find out from your landlord which of you is responsible for insuring the premises.
Secondly, if your cake baking business employs anyone other than yourself, employers’ liability (EL) insurance is compulsory and you must be insured for at least £5 million. Cover of this sort enables an employer to meet the damages and legal fees for any employee who falls ill or incurs an injury at work due to the employer’s fault or negligence. The Health and Safety Executive (HSE), the body charged with enforcing the law on EL insurance, can fine employers up to £2,500 for each day the requisite insurance is not held.
Whilst small business owners are not legally obliged to have public liability (PL) insurance, it is advisable to take it out nonetheless, especially if your premises are visited by members of the public. This insurance covers the costs of any injury experienced by a member of the public or damage that occurs to their property at the fault of you or your business. Many small business owners avoid taking out public liability insurance as a result of the high cost of premiums. The legal fees and settlement costs that a claim might incur, however, could prove far greater than the initial premium costs and could easily bankrupt a small cake baking business.
As a cake baking enterprise, your business will have a material product to offer consumers and you will be responsible for any injury or damage that product may cause. As such, your business will need to hold some form of product liability insurance. Again, this will cover any legal fees or settlement costs that may result from a claim. Product liability insurance is usually purchased as part of a combined liability policy.
All these types of insurance can be purchased from a business insurance broker. Costs will vary from business to business but a variety of websites allow you to compare competitive quotes and purchase insurance online.
What Are The Licensing Requirements?
As a food business, you will need to register your business and premises with your local authority. This applies to both temporary and permanent business locations, including home catering, market stalls, vehicles and domestic premises, as well as cake shops and tea rooms. Bear in mind that new businesses must register at least 28 days before opening. If several parts of your business are run separately, you may require more than one registration. Be sure to check with your local council. The registration process is free. All you need to do is apply to your local authority for the relevant forms. Once your business is licensed, you will need to stick to all the terms of you licences and may be liable to inspection by your local authority.
Are There Any Additional Requirements?
If your business will be serving alcohol, under the Licensing Act 2003, you will need a separate licence to cover this. You will also need additional licenses if you plan to serve hot food between 11pm and 5pm, to sell food from a stall or van in the street or to provide entertainment such as live music.In addition, if you run your cake baking business from home but happen to have made any changes to your property in line with your business needs, such as extending a kitchen or building an office, you will need to pay business rates as well as council tax.
A Quick Checklist
Here is a checklist of all the licences you need to apply for, or should consider applying for, and all the forms of insurance you need to purchase.
- Business premises insurance
- Employers’ liability insurance
- Public liability insurance
- Product insurance
- Registration with your local council
- Any additional licences
Remember to attain all relevant licences and insurance swiftly to establish your status as a professional cake baking business. This will also bring you the peace of mind you need to focus on the commercial success of your enterprise.