Do Your Homework Before You Start Your Home Based Business

How often have you caught yourself lecturing your children just like your parents did you to? One common theme is to do your homework. Not just in the literal after school variety, but checking in to jobs to apply for, future careers, colleges to attend. We want our kids to evaluate their alternatives and make good choices. We need to make sure we follow our own advice.

For many of us the idea of working at home sounds perfect. Get the kids off to school, finish off the coffee, and enjoy the 20 foot commute to the office. However ideal this may sound, make sure you have done your homework before you decide to quit your job and start working at home.

Working at home definitely has its advantages. You have the independence of working for yourself for the most part and setting your own schedule. It allows you the flexibility to balance priorities and schedules with work, and there are zero commuting costs or time lost commuting each day.

On the negative side, it can be difficult to get things done when you have lots of family distractions. Additionally, some people have a very hard time setting boundaries and can wind up working more at home than they ever did in the office. There are also a number of legal and tax issues to make sure you have resolution to before you start your work from home career.

Zoning

Your local city or county's local zoning law may or may not allow you to run your business from your home when you live in a residential area, as most of us do. Being a freelance writer or web designer shouldn't present a problem, but there can be problems if your business involves lots of car traffic in your neighborhood and causes parking issues for your neighbors.

If you live in an apartment or condominium, make sure to check with your association to see if there are any restrictions on your ability to have a business in your residence. Also, if you do find out it is ok to open a business in your house or apartment, find out if it is ok for you to put out a sign with your business name. Check to see if there are any restrictions as far size, colors, etc, for your sign.

Business Formation

When setting up your home based business, make sure you consider what type of entity you are going to set up. Consider an LLC (limited liability company) at the very least to protect yourself. If ever something happens and your company is sued, the LLC protects your personal assets; the only liability in the case of a judgment against your company would be the assets of the LLC, not your personal assets. There are different types of LLCs with different advantages and disadvantages. The best thing to do is spend a little bit of money and seek the advice of a competent CPA and also a competent business law attorney. The can advise you what is the best strategy for your situation and it will be well worth the money spent to talk with them for a half an hour or an hour.

If you have designed or come up with a unique name or logo for your business, obtain trademark protection. To learn if you need this type of protection and how to obtain it contact the U.S. Patent and Trademark Office (www.upsto.gov). You can also read about it in our article Trademarking Your Business: Why It's Important.

Taxes

While you still have to pay taxes on your home based business, the good news is you can qualify for many tax advantages. You will need to learn the tax laws of your state in addition to federal tax laws. Put taxes on your list of things to talk to the accountant about, as different LLCs have different taxation for the wages you pay yourself. You will need to obtain a federal employer identification number (EIN) for your home-based business or you may be able to use your personal Social Security number; but check with the IRS online to be sure.(irs.gov)

Licenses

Many businesses require you to have a business license. To check if your business is one requiring a license from your city and/or state, you can check on requirements in your area through Business.gov (www.business.gov/topic/Licenses_and_Permits).
While there are lots of considerations to take into account before opening a home based business, the benefits present a huge upside. Make sure you do your homework, and good luck pursuing your dreams.