Private Dining Operations Guide #8: Licensing & Legal Setup
The line between personal chef services and catering businesses changes the entire legal foundation of your work - with pros and cons.
A personal chef who cooks exclusively in clients’ homes is operating as a service. The legal category is closer to a nanny or housekeeper than a restaurant. In many states, that arrangement does not require a full business license or commercial kitchen approval, because no goods are being sold and no food is being prepared off-site for delivery. You are paid for your time and skill, the client buys the groceries, and the food never leaves their home.
The moment you cross into preparing food off-site and bringing it, or selling goods rather than service, the legality changes completely. You become a business that needs a city license, a kitchen the city has approved, equipment the city has approved, food safety certifications, and depending on what you serve, a liquor license.
This is something I wish I would have known and considered right in the beginning, instead of finding out later.
Consider what do you actually want out of life. Do you want to trade your time for a service salary from a client or do you want to own an asset that pays you the same way a client does but also appreciates over time with has greater potential to reward you long term? Theres no right or wrong answer, its just something to really consider.
Small pros and cons. Would you rather avoid having to manage any employees, purchase equipment, and own a space OR prefer to build an asset that can run without you, that feeds you forever whether you keep working on it or not? Imagine hiring a chef to replace you one day and still draw s
to operate it or collect dividends as you move on to your next venture.
This guide walks through what crossing that line requires and why you should do it.
Insurance is the natural companion topic and is covered in next week’s guide. It is a prerequisite for most of the licensing here, not something you sort out after. City license applications often require proof of general liability coverage at the time of submission, and the liquor license cannot be issued without liquor liability in place. More on that another time.
Licensing Does Matters
Before we walk through the requirements, here is what is waiting on the other side of doing this work.
Liability protection that holds up. If something goes wrong at an event, a guest gets sick, you damage an expensive countertop, an inventory item goes missing, your personal home, savings, and car are not on the line. The business absorbs the risk. The cost of forming the entity is small. The cost of not having it can be everything you own.
Credibility with the clients worth booking. High-net-worth households, corporate clients, venues, and event planners all expect to work with real businesses. The moment you can hand someone a current certificate of insurance from a registered entity, you become eligible for work that is not available to chefs operating without that foundation. This leads to greater revenue.
Tax efficiency at scale. The S Corp election alone can save thousands of dollars a year in self-employment tax once your revenue crosses the threshold where it makes sense. Those savings do not exist without the entity in place. Done right, the structure starts paying for itself.
The ability to grow. Hiring staff, signing contractor agreements, taking on a kitchen lease, opening a business credit line, building business credit history, eventually selling the business when you are ready. None of that is possible without the entity to hold it.
Pricing you can defend. When you are running a real business with real overhead, you can charge real prices and stand behind them. Pricing as a side gig keeps you trapped at side gig rates, no matter how good the food is.
The legal setup is not the fun part of building a private dining business. It is the part that lets the rest of the business exist. Spending a few months getting it right gives you the rest of the years to do the work you want to do.
The Entity Decision
Before you do anything else, you need a legal structure for your business.
The three options most private chefs choose between:
Sole proprietor. The default if you do nothing. You and the business are legally the same person. Your personal assets are exposed if anything goes wrong. Not recommended once you start working with clients of any meaningful budget.
LLC. Limited liability company. Separates your personal assets from the business. Your home, your savings, and your car are protected if the business gets sued. Pass-through taxation, which means business income is taxed once, on your personal return. The most common starting point for private chefs who are formalizing.
S Corporation. This is technically a tax election rather than a separate entity type. You can form an LLC and elect to be taxed as an S Corp, or form a corporation and elect S Corp status. The benefit: as an S Corp owner you take a reasonable salary plus distributions, and the distribution portion avoids self-employment tax. The cost: more accounting, payroll, separate quarterly filings, and an accountant who knows what they are doing. This is not that expensive in the end and worth it for us. The very first person I hired was an accountant. As a small business, its doesn’t take much and we found someone who charged only $300 month.
The S Corp election starts paying off when you can take a market rate salary and at least $10,000 a year in owner distributions on top of it. Below that threshold, the added complexity costs more than the tax savings.
After the entity is formed, you need three more things to operate cleanly:
EIN (Employer Identification Number). Free from the IRS, takes about five minutes online, gets you a federal tax ID for the business.
DBA (Doing Business As) registration if your operating brand name differs from your legal entity name.
Business bank account tied to the EIN. Do not commingle personal and business funds. This will save you from a year of bookkeeping cleanup later.
Where You Can Legally Cook
The legal requirements scale with where the food is being prepared. There are roughly four levels.
Level 1: Client’s home.
Personal chef service. The client’s kitchen is where everything happens. No commercial kitchen approval needed because no commercial activity is happening at your address.
Level 2: Your home.
Cottage food laws govern this and they are state-specific. New York allows shelf-stable foods through a Home Processor Exemption with no sales cap. California’s MEHKO law allows home meal preparation in cities that opted in, capped at $75,000 a year. Florida caps cottage operations at $15,000. Most cottage food laws do not cover the kind of perishable, multi-course tasting menu work private chefs are typically hired for. This level is rarely the right fit for private dining.
Level 3: A shared commercial kitchen building and private kitchen.
Spaces like The Hatchery in Chicago, Nimbus in New York, Amped in Los Angeles. You rent dedicated kitchen space within a licensed commercial facility. You become responsible for your own city licensing tied to that space. Membership runs $1,000 to $1,250 a month for using shared spaces before any of the city licenses you also need. Some charge per hour for use.
We have two private kitchens in The Hatchery and rent is high. Huge benefits of being pre-zoned for liquor licensing, utilities included, maintenance included, carts round every corner, inspections scheduled ahead, tons of community support. Very clean and well managed.
Level 4: A brick and mortar
Pros and cons. You can either lease and have a landlord that does tenet improvements and you don’t need to have the money to necessarily build out the space. Or you can buy and instead of giving your money to someone else, you can start building equity on a building that you own. The monthly costs tend to be less than the shiny commercial kitchen spaces like The Hatchery, but now you’re suddenly responsible for all the things that those spaces otherwise include - the cost of gas, water, and maintenance are higher and now they are also adding to your to-do list and managing a building space without a dedicated team. If my oven goes out while I’m at The Hatchery, someone on staff comes by right away and we have a ton of community, so I can go to my chef buddy next door and use his oven.
Each level changes what licensing you are responsible for.
A chef cooking only in clients’ homes has a fundamentally different legal stack than a chef operating out of a shared commercial kitchen, even if the food on the plate looks identical. However, if you ever want to sell wine and alcohol and the upside is huge, you are required to get all licensing in a properly zoned building before you apply.