A home-based business is an attractive opportunity for people who want to own a company, but can't or don't want to work away from home. Among the advantages:
- There are no commuting costs
- It takes only seconds or minutes to get to work
- The business incurs no real-estate expenses
- Owners can set their working hours
- A home office and certain other expenses can be deducted from your taxes
But before launching your home-based business, you should carefully explore the potential legal issues specific to home-based businesses to ensure you are in compliance with local, state and national laws. In many instances, the laws may vary depending on the type of business you are operating. For example, different laws may apply to a home-based daycare business than to a freelance web-design business where you are the only employee.
An experienced small-business attorney should be able to help ensure that you're in legal compliance with all applicable laws.
Some Issues to Investigate
Among the potential issues to investigate with your attorney:
Is my business in a regulated industry?
The nature of your business may dictate whether your business can be operated from your home, and whether licenses, inspections, zoning exemptions and permits are required.
For example, home-based businesses with more than one employee and businesses where clients come to your home may require inspections to be in compliance with local fire regulations. Permits may be required for businesses with potential hazards, such as a beauty salon, restaurant or company handling or storing potentially dangerous materials.
Are there zoning issues that restrict my ability to do business from home?
In many communities,
real estate zoning governs how different types of property can be used. For example, zoning rules might dictate that farming operations only operate in one part of a town, warehouses are located in another part and manufacturing plants exist in a third part of town. These rules are designed to keep peace between neighbors and ensure consistency in different areas of a city.
But zoning restrictions can have an impact on home-based businesses. Depending on the nature of your company, you may have to investigate whether your business is allowed under local zoning rules, or whether it's possible to get a zoning variance to operate your business. Zoning may also restrict your ability to display onsite signs for your company or provide parking for clients and employees.
Do I need additional liability insurance?
If you plan to have employees working from your home, or if clients will be in your home, your existing homeowner's or renter's insurance may not cover you if anyone is injured or files a lawsuit against you. Review your existing policy, and talk to your insurance agent to make sure you're adequately covered.
Am I entitled to home office deductions?
In certain circumstances, the Internal Revenue Service allows individuals to
deduct part of their real estate taxes, mortgage payments or rent, utilities, insurance and maintenance for their home office. To qualify for the deduction:
- Part of the home must be used exclusively and regularly as your principal place of business, or
- Part of the home must be used regularly to store inventory, as rental property or for a daycare business
Questions for Your Attorney
When meeting with a small-business attorney, make sure he or she understands that you'll be operating your business from home and that you want to be in compliance with all relevant laws.
Among the questions to consider asking your attorney:
- Have you previously worked with the owners of home businesses?
- Do any permitting, licensing, zoning and inspection requirements apply to my business?
- How can I minimize my potential liability when operating a home-based business?
- Do you handle tax and real-estate legal issues, or can you recommend experienced attorneys who do handle those issues?