The Bakery was used as a front company for Nancy Botwin's dealing, to launder money through. When Nancy wanted to give up the bakery to purse a career in growing marijuana, Sanjay burned it down.
In "Free Goat", Nancy realised that her drug money was useless to her as she couldn't deposite into a bank account. Doug suggested that she start a cover business. She hoped that she would be able to turn it into a real business but it never did.