Are Home Based Businesses Good?

If your business allows, you may be able to work out of your home, as so many people are doing today. A home-based business has many advantages. It is less expensive than a storefront, you can choose your own hours, it cuts out the commute, it allows you to work around family needs, and you don’t have to dress up. There are also some tax advantages.

On the other hand, these same advantages can become problems. You need a lot of self-discipline to work steady hours when the yard work beckons. Family needs can impinge on work, and it may be hard to feel professional in your pajamas! Working at home can make some people feel isolated and unmotivated. A home environment may also interfere with your professional image.

After weighing the pros and cons, you may choose to go ahead with a home business. Consider your own personality and needs and try to come up with a system that works for you. For example, you may need to get dressed up as if you were going out to work or give yourself rigid office hours in order to keep on track. Efficient time management is vital.

Before hanging out your shingle, make sure that a home business is permitted at your location. Some housing associations, lease agreements, or zoning restrictions may prohibit this option or have rules about signs, sales, deliveries, or other practices. Depending on the type of business, state or federal law may also limit what you can do in your home.

Starting a home business is very much like any other small business. You need to develop your business plan and carefully lay the groundwork. You also need to market your business, have a good recordkeeping system, and pay taxes.

However, there are a few considerations unique to home businesses. You may need to get a home occupation permit as well as the usual licenses and permits. Be sure to speak to your insurance agent about the new use of your home and make sure you have adequate coverage. You may need to establish an exclusive room or area of the house for your business. For tax purposes, if you claim your home office as a business expense, that part of your home must be used “exclusively and on a regular basis.” It might be worth remodeling to provide a separate entrance if you plan to receive clients. (Check your local ordinances to ensure that you are permitted to have clients come to your home office.)

REGULATIONS AND RED TAPE

This is the part of business ventures that many people dread. Getting through the maze of government regulations can certainly be one of the most confusing aspects of doing business. But while this process may be intimidating, it is important to do it correctly, since noncompliance can result in costly penalties.

Even very small or part-time businesses have certain requirements. It is your responsibility to adhere to any and all regulations that apply to your business. Fortunately, there are a lot of people out there willing and eager to answer questions and help you with this task. Don’t hesitate to ask.

What do you need? The answer is different for every business and in every city, county, and state. You have to start by asking questions. Begin with your city and/or county government. Describe your business and a friendly worker will direct you to the appropriate forms and requirements. Then contact the state and federal agencies that apply to your business. Some common permits include:

  • Business License. Permit to operate a business locally. Check with your local business agency.
  • Home Occupation Permit.
  • Miscellaneous Local Permits. Contact the local business agency.
  • Police Permit. Some businesses require police clearance or permit.
  • Food Permit. For businesses which make or sell food.
  • Seller’s Permit. Required in states with sales tax. Apply with the appropriate state agency.
  • Liquor License. Regulated by state agencies.
  • Building Permit, Fire Certificate, Zoning Permit. Check with your local planning department.
  • State Occupational License. Certain occupations (e.g., doctors, lawyers, general contractors, day care providers) require a special license. Check with the state agency regulating consumer affairs.
  • Federal Export License. Get more information on this from the Department of Commerce.

There are a number of optional certifications that can help in some situations. You may want to look into being certified as a small business or a minority-owned, woman-owned, or disabled-veteran-owned enterprise.

Don’t get discouraged with all this paperwork and red tape. Your own business is the light at the end of all the forms. Remember, there are people willing to help if you feel overwhelmed. Contact your local Small Business Development Center or other local economic development organization.