Need some advice,

I live in a small town in PA (Waynesboro)...the nearest commercial kitchen is nearly 2 hours away. And although the price and kitchen is perfect. Driving 4 hours round trip to make cupcakes or etc...is not fun or ideal. I used it for a huge market day sale, which made sense...but the 4 hour drive 2 days in a row was a lot to add to 5 hours of baking each day.

I have a local church that contacted me about using their kitchen. The pastor was very excited and wanted to help me out...and thus help the community out. (I have attended several town events and they are excited about me opening up a brick and mortar building, but that is still at least 10+ months away) The pastor talked to the churches' attorney and I guess he got some push back from the attorney, since they are non-profit. I have seen on TV shows (cupcake wars and chopped) where they have their catering out of church kitchens. And I know I have seen a few people say they do so on this forum....

I am going to meet with the pastor once again this week, again he is for this....but what I need is some tips to help with the attorney or church members or etc...Those that do rent from churches...what is the setup? They have a food bank and I told them that when I bake, I can make some for the food bank or make a donation...or etc...He said the biggest issue with the attorney is that they are a nonprofit and I would be for profit. But I know that churches rent their building for weddings, I just got married and paid a nice building "fee" for the wedding....so I thought maybe I could use that as idea...

Any feedback would be great. I have tried local restaurants (some do not even have ovens??? anyways) I tried the VFW, Moose, and fire houses...I have looked up and knocked on so many doors it isn't funny. The only place that seemed interested was a pizza place...but they didn't think the hours would work, since they used their kitchen 20 hours a day, when closed they prep for the next day.

If anyone has suggestions let me know...I even posted on craigslist...LOL

Oh...I am licensed and have insurance and ServSafe certified....

Thank you!

Lisa

well this might not be your favorite post but i think the attorney has something there

a non-profit is not defined by how much money they make--it's just about tax exemption

and unfortunately i think it's a valid argument that if a non-profit is 'harboring or hosting' a for profit it risks it's tax exempt status to do so

i know first hand the story of another church bookstore (i launched & managed one) that got a nice write up in the local paper for it's renovation job including that they were going to be serving starbucks coffee in the store

whoa ho ho--the state clamped down on them hard and wrapped them up in some serious legal mumbo jumbo that was mucho unpleasant/scary for them for some time not to mention financially ruinous if the state had prevailed

of course they got out of it eventually because they were only brewing and serving starbucks brand coffee not a real starbucks kiosk or anything like that--

so i think the attorney is right

sure non-profits make money for weddings and whatever--but a for profit cannot really be umbrella-ed under a non-profit because the state can take away their tax exempt status--most churches would go under if they had to pay property tax etc.

every church in the country would have more businesses running in them if it were allowed--

not to mention the building fee for a wedding goes to pay a lot of people to do thier jobs before during and after weddings, the lights, the heat/air conditioning, the parking lot, maintenance and everything else--i'm not saying they did not profit some from your wedding

understand....on your note about the starbucks...I went to a church in Texas that did sell Starbucks...coffee, cups and etc...not sure how they got around it. And the church I go to now sells baked goods and coffee, they reached out to me to sell cupcakes there..LOL...but my church does not have a commercial kitchen like the other one. I know there is a loophole, because I have heard of people using the kitchens. Thanks for your advice...and advice on a finding a commercial kitchen? I have about given up and I am not going to drive 4 hours to bake a cake and etc...with price of gas and travel I would never make a profit...LOL.

lots of churches sell lots of things--i managed a bookstore--we sold snacks, doughnuts, pastries that i made, coffee, drinks, books and gifts, jewelry etc. but it was all under the umbrella of the non-profit--everything had to be done very carefully--the store was never advertised outside it's little place within the church confines

a bakery like this operating in the building is not under the ministry of the church

churches can have only have so many 'fund raisers' a year without getting penalized or taxed or smitten by god or something----i can't remember the consequence but what a tangled mess taxes and all that stuff is--even for non-profits who don't pay them!

there is no loophole--but people can get away with it for a while and maybe forever but the risk is genuine--it all depends on who the tax & legal people are in that area

i'd recommend avoiding advertising if you continue

no easy way huh

wish it were different--you might could get away with it but might as well do it at home for all that

Thanks.

AI don't see how this is a problem. The church will be making money on renting your facility, not getting a cut of your business. I know of a chocolatier in my town who rents a church kitchen. She has to pass a health department inspection separate from the church's inspection...same kitchen, inspected twice. Double the fees for the city...go figure.

As far as the attorney is concerned, I'm guessing his biggest concern would be liability. You need to have liability insurance for your business and have a clear contract stating that the church is not responsible for your food products. I think that would be a much bigger issue than money. Churches are businesses, after all. They may not be for-profit, but they certainly need (and have) revenue.

ANon-profit organizations can still make a profit and retain tax exempt status for the generated profit as long as the profitable activities are related to the main purpose of the tax exempt organization. They can even pursue other profit-generating activities that are unrelated to the main purpose (e.g. a church renting out its kitchen to a bakery)...the net income for those activities would be taxable, but this would not affect the tax exempt status of the organization.

http://www.irs.gov/Charities-&-Non-Profits/Unrelated-Business-Income-Tax

IMO the church's attorney is either being overly cautious, is worried about liability, or is not up to speed on the rules for tax exempt organizations (or all of the above).

Also, make sure the church kitchen can actually pass a health inspection before you make any commitments. There may be a lower bar for the kitchen's use for church activities than for commercial use.

Thanks ya'll for your input.

I have liable insurance up to 1 million (I needed that for my license) and the kitchen is already licensed by the county...they use it twice a year for a city dinner and for making chocolate Easter eggs to sell. I would have to pay for the inspection on myself, I have one license already, but it is for the other commercial kitchen. Thanks again for everyone's input.

Sassyzan: What state does your friend use the church's kitchen? Just curious...wondering if they could help me with some ideas...thanks again.

Everyone is being so helpful....I hope to have my bakery opened by early next year...then I won't have to worry about it anymore...LOL....

it doesn't work that way here

the non-profit needs to own the unrelated 'for profit' businesses here in tn or they'll loose their tax exemption- bam!

ex. day cares, after school care, houses, private music lessons, stores, cafeterias, gyms, concerts, theatre, etc all church owned for profit biz under the non-profit umbrella

all the risk is on the church opening themselves up to for profit standards--fire & health inspections and zoning compliance issues--often they are in residential zoning ruh roh

so long as the church does it's church thing they're fine -- it's a pandora's box otherwise

simply said, the property the 'for profits' reside on will be legitimately taxed unless the 'for profit' is owned by a non-profit

think of a mega church somewhere having a food court with a pizza hut and a gigi's cupcakes and a yogurt mountain and a dunkin donuts--this doesn't happen

A

In the US it does not matter if the church owns the for profit business or the for profit business is an outside company, if the income is unrelated to the church's primary mission it (meaning only the unrelated income) is taxable. OP can clarify this with the local IRS office.

This shouldn't be a problem since it doesn't affect the tax exemption for the exempt activities.

if only it was that easy

i don't claim/want to know tax code by any means

1. but i mean tell that to my friends who almost lost their church and had to fight in court about the starbucks situation i outlined up thread--guess everybody didn't read see that part of the tax code huh?
2. why doesn't every church have lots of viable unrelated profit businesses owned by others located on their property--all churches want/need/could use more income --this would be an easy peasy way for them to make tons of money-
3. guess church lawyers over react

i firmly believe it does not work that way based on my years working in a non-profit and the problems i know others have endured

and i guess the biggest reason of all is one weeny link to the fathomless tax code is just a drop in the bucket to the working reality of all this

AI can't speak to the Starbucks-related legal trouble since I don't know the details, but it's possible the church was not paying tax on the income they received from the Starbucks kiosk. It's also possible that the state's lawsuit was unfounded.

Many churches do have for-profit enterprises that bring in money. For example, the mormon church makes more than a billion dollars a year from its for-profit businesses: http://en.wikipedia.org/wiki/Deseret_Management_Corporation

Thanks again everyone for you advice and inputs....if the church doesn't work out....any ideas of where else I can go?

Lisa

AIt looks like PA has a cottage food law, check out the site below for more details. http://extension.psu.edu/food-safety/entrepreneurs/starting-a-business

Yep...but I have pets, so I can't bake in my house...and if you make cheesecakes or pies, you can't use a dual-kitchen (personal and business). So my house is not an option....I was going to try to have one of my friends who has no pets and etc...but again if I need to make cheesecakes...I can't use their place either. & she didn't want to go through the process, with her kids and etc.

AIf you don't have room on your property to build and there are no nearby kitchens available for rent, the next best option is probably to rent out some commercial property and build a kitchen there. This would be a significant investment and if you decide to rent to others you will have a limited market due to the CFL in your state but if the market is there and you have a good business plan it can be done.

Well I have contacted some local community centers....so fingers crossed. Thanks again everyone.