How to Start a New Home-Based Business
Change your career or put some extra money in the bank. Either objective is a good reason to start a home-based business. Full-time or part-time, a home-based business is a business and needs to be treated as such. The media are filled with stories of entrepreneurs turning home-based businesses into a multinational success. It is a possibility for any home-based business--all it takes are the same ingredients as any successful business: a good product, a market ready to buy and good financial management. With that idea in hand, starting a home-based business is a simple process.
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Things You'll Need
- Business name
- Tax identification number
- Business plan
- Business location
- Financial management system
Instructions
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Determine whether the home-based business is permitted in a residence. Contact local planning and building officials for zoning and building requirements. Call the fire marshal and health department to learn about applicable regulations. Talk to the local tax collector or finance department to learn about the required business or tax collection licenses.
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Contact the secretary of state's office or corporation commission to verify whether your chosen business name is available for use. Register the business name by filing the necessary paperwork with the secretary of state or a local court, if required. Obtain necessary state tax licenses or permits. Contact the Internal Revenue Service and state income tax agency to apply for an identification number used for filing business tax returns.
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Write a business plan. No matter how small the business, a written plan defines systems and processes for operations. A basic plan includes a description of the business or product, definition of potential customers or clients, and financial projections for revenues and expenses. Business plans prepared for a financial institution or Small Business Administration loan require more detail.
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Create an area in which the business will be located. Depending on the nature of the business, everything needed may fit on a bookshelf or in a dedicated room of your house. Defining a specific area exclusive to the business ensures it is separate from the household. If there is physical inventory, set aside space expressly for product storage and remove all household items from that storage area.
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Create a financial management system. This can be a running tally on a tablet, a spreadsheet, money management software or something as sophisticated as a software-based accounting program. Open separate checking and savings accounts for the business. Obtain a separate business debit and credit card or dedicate an already-held card for business-only purposes.
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Tips & Warnings
Keeping the business physically and financially separate from the household results in better financial management and operations by creating a psychological as well as physical separation.
Organize your files and record-keeping system, and consistently use the system to avoid "lost" information or records.
Obtain approvals first; following the adage "better to ask forgiveness than permission" may result in significant fines or expensive legal action.
Using the kitchen or dining table may be expedient at first, but the constant shuffling from business to household use may result in wasted time or important information being lost or damaged.
Virtually all home-based Internet-advertised businesses that require an investment to implement are scams, according to the Federal Trade Commission. Research any such business with the Better Business Bureau and the Federal Trade Commission.
