How to Start a Home Business

If you’re looking for a career that provides flexibility and freedom with unlimited earning potential, you might want to consider starting a home-based business.

starting-a-home-based-business_smAccording to the US Small Business Administration, businesses with less than 10 employees (microbusinesses) make up over 75% of employers in the private sector. Many of these are home-based businesses.

If you’ve got a high amount of self-discipline and the willingness to learn a diverse set of skills—such as marketing, financial planning, and communication—starting a home-based business may be right for you.

Check out the following tips to get your career moving in a new exciting direction:

1. Plan to Succeed

Thanks to technology, running a business is easier and less expensive than in the past. According to the US Bureau of Labor and Statistics (BLS), an average of 80% of small businesses will survive their first year.

Opening a business without a plan is like driving a car with no clue where you’re going. Yes, you could just jump in and start driving, but eventually, you’ll run out of gas. While there’s no guarantee of success for any new business, creating a business plan puts you ahead of the competition from the start.

The good news is there are lots of resources available to help you create your own business plan. The SBA offers free business plan courses and counseling at a Small Business Development Center near you. Take advantage of these resources; they’ll help you create a marketing plan and financial projections even if you don’t need financing to start your business. Both of these things are crucial to the health of your business in today’s competitive marketplace.

A SBDC also helps you find access to working capital to start your business through the form of loan and grant programs.

There is a newer trend in business plans that advocate starting with a one-page business plan. This makes sense because your business plan is a living document; it will change and evolve as your business does.

2. Choose Your Legal Business Structure

You need to determine the right legal structure of your business. The business structure will not only affect the amount of taxes you pay each year, but it also affects the protection of your personal finances in the event of a lawsuit or other serious matter.

Many new business owners start as a Sole Proprietor because it’s easy to set up. Taxes are simple because you only need to file a Schedule C with your yearly personal income taxes paid to the IRS. State tax requirements vary depending on where you live. However, sole proprietors have no personal finance protection in the event of a lawsuit.

If you’re planning on eventually hiring employees, you may want to consider forming an LLC or corporation. LLCs and corporations are separate business entities from you as the owner of the company, meaning if an employee creates a legal issue for your company your personal assets and finances are protected.

3. Do Your Due Diligence: Determine What Licenses & Permits Are Needed

Many home-based business operators are surprised to learn they need approval from their local zoning department in order to do business out of their house, even if you are working primarily online. You’ll need to check with your state and locality to find out about licensing and permit requirements.

Here are some of the most common business licenses you may need to obtain:

  • General Business Licenses: This license allows you to legally operate in your city or county. Check with your local Economic Development department for more information.
  • Home Occupation Permit: Most local zoning departments require all home-based businesses to get a Home Occupation Permit. If a general business license is not required in your city, you still need to make sure you’re allowed to conduct business from your home. If it’s not, you may be able to file for a variance or conditional-use permit.
  • Sales Tax Permit: This can be tricky. If you sell or intend to sell physical or digital products (online or offline), you may have to collect state and local sales taxes. If you sell in a state that charges sales tax on gross receipts or excise tax on businesses, check with your state revenue agency on how to proceed.
  • Professional and Trade Licenses: Certain types of businesses are required to get professional or occupational licenses from their state government. This is common for occupations like child care providers, real estate agents or construction contractors.
  • Health Department Certification: Health Department permits are typically issued by the county government upon completion of an inspection of the business premises. Depending on state regulations, additional permits may be required for food service or food preparation.
  • Safety Permits/Inspections: Some businesses need a safety permit and/or annual inspection from the local fire department. If your business involves the use of flammable materials or the assembly of several people in one location, such as a child care provider, restaurant or you see clients in your home.
  • Sign Permits: There are often restrictions on the type, size, or location of signs allowed on your property or by the roadside.
  • Building Permits: If you need to make structural changes to your property to accommodate your home business, you’ll need a building permit. Check your local government’s building and planning or zoning department before starting any construction projects.
  • Homeowner’s Association (HOA): This is not a license or permit requirement, but your local HOA may restrict the type of business activities you conduct in your home. Check your bylaws or call your HOA for more information.

4. Setup Your Home Office

While home-based businesses provide the freedom and flexibility to work from bed in your pajamas if you want, setting up a separate room as a physical office is the best way to go. You’ll have access to all the equipment you need and the ability to conduct meetings from your desk.

Here are some suggestions for creating a home office that works for you:

  • Create a dedicated space in your home with a door (that locks) free from distractions and intrusions like children and pets. It can be as small as a walk-in closet or a spare bedroom.
  • High-speed internet connection with plenty of bandwidth
  • Comfortable chair and adequate lighting
  • If you are working with a laptop, it might be worthwhile getting an external monitor.
  • Printer and other office supplies and equipment (such as a paper shredder and an external backup hard drive for your computer or cloud storage).
  • A surge protector for your electronic equipment

Starting a Business Can Be Rewarding

Starting a business can be overwhelming. But with careful planning and flexibility, you’re on your way to enjoying the benefits of a self-employed lifestyle.

To Learn More
BizFilings is a small business registered agent and legal services company. We’re dedicated to helping home-based business owners like you stay compliant with licensing and registration requirements. For more information check out our Incorporation Wizard or contact us today.

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