Business Law

Set Up Your Home Business the Right Way

When it comes to convenience and keeping down your overhead costs, not much can beat running your business from the comfort of your own home. Approximately half of all U.S. businesses operate from their owners' residences. Whether it makes sense or is even possible depends on a variety of factors. Plus, you'll have to deal with several local laws.

Zoning May Be a Problem

Zoning laws are typically municipal or county ordinances. They draw a line between residential areas and commercial areas. Homeowners in residential areas are entitled to enjoy their properties without a great deal of business traffic and activity going on next door. If you run a consulting business from a desk in your spare bedroom, you will most likely not run into a zoning problem.

If your small business generates a lot of traffic, or if you want to place a neon sign in your front yard or a bulldozer in your driveway, you'll probably have to get permission from your local zoning board. Your neighbors will most likely object. If you live in a development, you might also have to deal with homeowners association rules.

Licensing and Permits

Depending on the nature of the work you do, your home-based business might also be subject to licensing requirements and other municipal laws. Some cities forbid home-based business from hiring employees or limit them to one or two.

Some cities require that home-based businesses register with the municipal government if more than a certain number of customers come to your home each week. You might also need a permit from the fire department if customers will come to your home. You'll probably have to get the same business licenses that you would if you had set up your business elsewhere.

Some Tax Laws Apply

You can deduct the cost of using your home for business purposes, but the Internal Revenue Service has strict rules regarding this deduction.

The area that you use for business can be used only for business. It can't do double duty as a den or spare bedroom when you're not working. Often, it must also be your "principal place of business." This means you create your work product there, or you use the space to run your business. This applies even if you travel to other locations on a regular basis.

Talk With Your Insurance Agent

Your homeowners' insurance policy may not cover losses or accidents associated with your business. For example, if a client falls on your steps, your insurer could deny the claim, making you or your business liable for any injuries. You can usually purchase a rider or a separate policy for added protection.

A Business Lawyer Can Help

The law surrounding home-based businesses is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a business lawyer.

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