Legal Considerations for the Home-Based Business Owner
When choosing to start a home-based business, you might be under the assumption that the field is wide open and you can do whatever you want. But, nothing could be further from the truth. You have a large amount of legalities that you must consider from your state, city, county and even your Homeowner’s Association if you have one.
In order to be sure that your business is compliant with all of these rules and regulations, it’s important to understand what may or may not be required and where to find the right answers.
Know What Type of Business You Are Starting
There are different legal entities that you can choose, from sole proprietor to incorporation. The simplest to set up that has the least regulation is the sole proprietorship, and it is in fact right for most home-based businesses that will be run only by you. If you have a partner then you’ll need to choose between an LLC and an INC. But, it’s important to understand your goals and where you see your business going before you choose.
Learn Everything You Can about Your Local SCORE Office
This is an excellent place to go to find out about the rules in your local area, as well as meet others who are embarking or new ventures, or to meet others who have already done what you are trying to do from home. They can help you avoid reinventing the wheel and doing so illegally.
Find Out about Any Local Business Incubators in Your Area
In many areas there are groups and associations known as business incubators. These are organizations that help small businesses, including home businesses, get off the ground smartly. They help you avoid making legal mistakes that can ruin your business and end up costing you more money down the road. Plus, they can help you be sure that your idea is profitable.
Visit Your Local Community College
If you are fortunate enough to have a community college in your town or nearby, then it will really pay off for you to check their website for services provided to small local business. They may not mention “home business” by name but if they have a small business center that helps with creating business plans and other assistance, or weekend classes and seminars, then you should take advantage of them.
Ask Your Homeowner’s Association
No matter what the state says, you need to check with your HOA to be sure that they are fine with the type of business you want to run. Most of the time if there will be no clients visiting your home, and nothing dangerous stored on the grounds, it will be fine. However, it is always best to check before spending money on getting your business going only to be told “no.”
Call Your State Taxing Authority
If you already know what type of business entity you plan to form, plus the products and/or services you will offer, then your state taxing authority can probably provide you with an enormous amount of information regarding permits and licensure that you will need to be fully legal.
Visit Your City Taxing Authority
Every city has their own rules, in some cases you’ll be required to get a state, city and county license. Most of the time they are very inexpensive so don’t panic about it. It’s more important that you are compliant than to fight this part of the process. Your city taxing authority will know whether a license is required or not and how much the fee will be, based on the type of business you want to have. Fees are typically based on projected gross revenue.
Visit or Call Your County Taxing Authority
This is typically located in the same building where you purchase your car, boating, and fishing licensure. Call them or visit them to find out if your type of business needs a license. Many times home businesses that are sole proprietorships, do not sell taxable items, and work only online will not be subject to this license. And even if you are it’s normally really cheap, less than $20.00.
Once you know everything you need to pay for in terms of licenses for your business, you might want to keep a record of everything in your calendar to remind yourself of upcoming fees. Most will send you notification within 30 days of payment due but this is usually considered a “courtesy” and your fee is due regardless of whether you receive the notice or not.
Staying legal is an important part of running a successful business and avoiding issues with the government or other authorities such as your HOA.