MightyRecruiterRunning a small business can be difficult, but operating out of your own home often presents a challenge to unsuspecting entrepreneurs. In fact, many people see homebased businesses as an easy way to dodge the legal and financial obstacles typically encountered by larger organizations. However, you cannot ignore such details without jeopardizing the future of your business.
On the bright side, the technical aspects of operating a homebased business fall into three basic categories. Whether you are experiencing substantial growth or just getting started, complying with these standards will increase your chances of success and protect the integrity of your business.
Follow the Rules
According to recent surveys, many home business owners adhere to a general code of secrecy in order to avoid problems with local zoning. Unfortunately, this tactic impedes your ability to conduct business, especially if you plan to make more money over time. Start by reviewing your lease or check with the homeowner’s association in your neighborhood to find out about potential restrictions. Then investigate city and county ordinances online or through your local chamber of commerce.
In some cases, you may need to obtain a zoning permit to operate legally within a residential area. This means you must prove that your business does not disturb the peace or safety of surrounding residents. Other common types of registration for home business owners include
- Occupational license
- Sales tax permit
- Health department permit
- Doing-business-as statement
- Federal Employer ID Number (FEIN)
Protect Your Investment
If you are operating a business out of your home, insurance coverage is also a necessity, even if you start with an inexpensive policy. Furthermore, most agencies can help you customize a plan that focuses on the distinct needs of your business, rather than wasting money on coverage you don’t need.
Depending on the size and complexity of your business, an unexpected lawsuit or loss of inventory could result in permanent damage to your reputation and finances. For homebased operations, you can expect to find three general forms of coverage to protect your initial investment.
- If you have an existing homeowner’s policy or renter’s insurance, consider purchasing additional coverage for low-risk operations such as online tax preparation or graphic design.
- For a slightly larger safety net, an in-home business policy encompasses both injury and theft and covers up to three employees.
- A business owner’s policy is ideal for people who need more than $10,000 in coverage. This includes a range of different circumstances, from medical costs and malpractice to power outages and natural disasters.
Take Advantage of Deductions
Permits and insurance might seem tedious, but tax deductions can actually be fun if you operate a business out of your home. In a way, you are reaping the same benefits as a larger organization without all the hassle of establishing a physical location. On the other hand, business owners who do not keep track of their expenses miss a vital opportunity to save money on new and recurring costs.
Deductions for home businesses cover a broad spectrum of expenses, such as advertising, mileage and equipment. In addition, you can write off a percentage of your mortgage and utilities if you have a designated workspace in your house. Some innovative entrepreneurs even write off craft supplies and other miscellaneous items like postage or donations. The most important part of this process is to keep a detailed record of your finances. This will eliminate any discrepancies due to inaccurate information on your return.
Overall, home business owners enjoy an unparalleled level of freedom and flexibility that maximizes productivity with little overhead. Don’t let your journey to success come to a halt before you get a chance to fulfill your vision. Instead, use these standards as a guide to create a strong operational foundation for your homebased business.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.