Food is arguably the most important thing to Shirelings. We also know that they ate cake because Bilbo Baggins had a very large one with 111 candles on it for his birthday at the beginning of The Fellowship Of The Ring.
Bilbo's cake was decorated with candles and a lot of flowers, which makes sense since Hobbits have a love of nature. If you want to bring a bit of Middle Earth to your celebration then be sure to use a Hobbit cake topper.
The example you see here is a kit with everything you need to recreate the outside of Bilbo's home. It comes with Bilbo Baggins, Gandalf, and Thorin Oakenshield figures, as well as the door to Bilbo's home, a bridge, a log, and foliage.
When you click on the links below you will see that there are plenty of other ways you can decorate your cake. You can use an edible sheet topper, something that looks like a picture but is placed on top of your cake and can be eaten. You can get a kit like the one seen here, or you can buy small figures of your favorite Tolkien characters. You can even use LEGO minifigures if you have some.
There are so many different options that you will be limited only by your imagination. But please be careful not to use something so small that it is a choke hazard if accidentally swallowed.