From idea to first sale — your step-by-step roadmap to launching a cottage food business in one of the most food-freedom-friendly states in the country.
Tennessee doesn't require a cottage food permit, but there's still groundwork to lay before your first sale. Here's the recommended sequence — each step builds on the last.
Decide what you'll sell and confirm it's allowed under the TFFA. Check the What You Can Sell page for the full Open / Restricted / Prohibited breakdown. Start with products you know well and can produce consistently.
Decide whether to operate as a sole proprietor or form an LLC. Most sellers start as sole proprietors (it's free and instant) and upgrade to an LLC later if needed. See the comparison table below for details.
If you're selling under a name other than your legal name — like "Sweet Southern Kitchen" instead of "Jane Smith" — file an Assumed Name (DBA) with your county clerk. Fee is approximately $15. This is a county-level filing, not state-level.
Required if you form an LLC. Recommended for sole proprietors too — it keeps your Social Security Number off business documents. Apply free at irs.gov. Issued instantly online (Mon–Fri, 7am–10pm ET).
Cottage food sold at retail is subject to Tennessee sales tax. Food and food ingredients are taxed at a reduced 4% state rate (plus local tax). Register for free through TNTAP — select "Register a New Business." Approval typically takes 1–2 business days.
Visit your county clerk to register. If your annual taxable gross receipts will exceed $10,000, you need a standard County Business Tax License (~$15). Under $10,000, a Minimal Activity License may apply. Check with your city hall too — Nashville, Memphis, Knoxville, and Chattanooga have their own additional requirements.
Design labels that include all 8 required elements: your name, home address, phone, product name, ingredients, net weight (dual units), lot number/date, and the mandatory disclaimer. No pre-approval needed. See the Label Requirements page for details and a sample label.
You're legally clear. Pick your sales channels — farmers market, online orders, local delivery, retail placement — and start reaching customers. List your products on SellFood to reach Tennessee buyers looking for homemade food.
This is the most common decision new cottage food sellers face. Both structures are fully legal for cottage food businesses in Tennessee. Here's how they compare:
| Sole Proprietorship | Single-Member LLC | |
|---|---|---|
| State registration | Not required — you're a sole proprietor the moment you start selling | File Articles of Organization with the TN Secretary of State |
| Formation cost | $0 (DBA ~$15 if using a business name) | $300 filing fee (minimum) |
| Annual cost | County license only (~$15/yr) | $300/yr annual report + county license + F&E tax (min $100/yr) |
| Personal liability | Unlimited — your personal assets are at risk | Limited — personal assets generally protected from business liabilities |
| Taxes | Federal Schedule C + SE tax. No TN income tax. Exempt from F&E tax. | Federal Schedule C + SE tax. No TN income tax. Subject to TN Franchise & Excise Tax (6.5% excise on net income over $50K deduction; 0.25% franchise on net worth, min $100). |
| Business bank account | Can use personal account (separate account recommended) | Separate business account required to maintain liability protection |
| DBA filing | County clerk (~$15) | LLC name filed at state level; DBA not usually needed unless using an alternate name |
| Filing portal | N/A | sos.tn.gov/businesses |
| Processing time | Instant | ~2 business days online |
| Best for | Getting started quickly, testing the market, low volume | Growing businesses, retail partnerships, liability protection |
Our recommendation: Start as a sole proprietor to keep things simple and free. Once your business generates consistent revenue — or if you plan to sell through retail stores — consider forming an LLC. The liability protection and professional credibility are worth the $300 annual investment at that stage.
If you want to sell under a name other than your personal legal name, you'll need to file an Assumed Name (also called a DBA — "Doing Business As") with your county clerk's office. This is a county-level filing in Tennessee, not a state-level one — which means the name protection is local to your county only.
The filing fee is approximately $15 and is typically processed same-day at the county clerk window. The DBA renews automatically when you file your annual state Business Tax return (Form BUS-428). There is no statewide DBA database for sole proprietors, so if brand-wide name protection is important to you, forming an LLC (which registers your name statewide) may be the better path.
Even as a sole proprietor, keeping business income and expenses separate from personal finances makes tax time dramatically easier. Most Tennessee banks will open a business checking account with your DBA paperwork or LLC documents. You'll also want a simple bookkeeping system — even a spreadsheet — to track sales, expenses, and sales tax collected.
State income tax: None. Tennessee fully repealed its income tax (the Hall Tax) as of January 1, 2021. You pay zero state income tax on self-employment earnings.
Federal income tax: Report cottage food income on Schedule C (Profit or Loss from Business) with your federal return. Pay self-employment tax (15.3% on net earnings over $400) via Schedule SE.
Tennessee sales tax: Food and food ingredients are taxed at a reduced state rate of 4%, plus local tax (combined rates typically 5.5%–6.75% for food). Collect sales tax on every retail sale and remit to the Department of Revenue via TNTAP.
Business Tax: Tennessee's gross receipts-based Business Tax applies to most businesses. Filed via Form BUS-428 through TNTAP. Businesses under $10,000 in annual taxable receipts may qualify for a Minimal Activity License at the county level.
Franchise & Excise Tax (LLCs only): If you form an LLC, you're subject to TN F&E Tax — 6.5% excise tax on net income (with a $50,000 standard deduction) and 0.25% franchise tax on net worth (minimum $100/year). Filed via Form FAE-170 through TNTAP. Sole proprietors are generally exempt.
Pricing is where many new cottage food sellers undervalue their work. Your prices need to cover four things: ingredient cost, packaging and labeling cost, your time and labor, and a reasonable profit margin. Here's a simple framework:
Take your total cost of ingredients and packaging for one batch, divide by the number of units produced, and multiply by 3. This gives you a starting retail price that accounts for cost of goods, labor, and profit. For premium or labor-intensive products — decorated cakes, small-batch preserves, artisan confections — a 4x or 5x multiplier is common and appropriate.
Visit Tennessee farmers markets, check competitor pricing on social media, and look at similar products on platforms like SellFood. Your homemade products aren't competing with grocery store prices — they're competing with other artisan and small-batch makers. Price for the quality and care that goes into your product.
Tennessee requires you to collect sales tax on retail sales. Many sellers build the tax into their listed price (e.g., price a $5 cookie at $5.35 to cover the ~7% combined rate) or collect it separately at checkout. Whichever method you choose, make sure your bookkeeping tracks the tax portion separately so you can remit it accurately.
Tennessee's Food Freedom Act gives you more sales channels than almost any other state. Here are the main options, each with different strengths for different business models:
The classic starting point. Tennessee hosts over 100 farmers markets statewide, from the Nashville Farmers' Market (16 acres, hundreds of vendors) to small-town weekly markets. Great for building a local following, testing products, and getting direct customer feedback.
Take orders through your website, social media, or SellFood and deliver locally. This model works especially well for weekly pre-order batches — customers order by Wednesday, you bake Thursday, deliver Friday. Shelf-stable products can also be shipped within Tennessee.
The TFFA allows you to place shelf-stable cottage food products in grocery stores, specialty shops, and other retail outlets. This is a powerful growth channel — approach local stores with samples, professional labels, and a wholesale price sheet.
Tennessee's festival calendar is packed year-round. Set up at county fairs, holiday markets, craft shows, and community events. These are excellent for high-volume, single-day sales and brand exposure.
The simplest model — customers come to you. Take orders online or by phone, prepare the products, and have customers pick up at your home. Zero delivery cost, zero booth fees.
List your products on SellFood.com to reach Tennessee buyers actively searching for homemade food. Built-in labeling tools, compliance guidance, and a marketplace designed specifically for cottage food sellers.
Track every step of your Tennessee cottage food business setup with an interactive checklist — from structure to first sale.
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