Information on Starting a Small Home-Based Business

Home-based businesses selling baked goods require special food permits.

Maybe you've dreamed about starting your own business for years, but don't quite have the capital or the right location to start a business in a storefront location. Many entrepreneurs decide to start a home-based business as a way to save money, start small and work from home in order to spend more time with family. Starting a home-based business requires many of the same steps required for businesses run from external locations, however. Researching information on starting a small home-based business is the first step toward achieving your entrepreneurial goals.

Zoning

Before committing time and money to starting a home-based enterprise, learn whether your home is zoned for business activity. Otherwise, your fledgling business could be shut down for violating commercial zoning restrictions. Start by checking with City Hall for a copy of local ordinances.

Similarities

Home-based businesses must undergo many of the same steps involved with setting up a business outside the home. You'll need to apply for a business license, purchase liability insurance and establish a tax identification number. If you plan to sell wares online to out-of-state customers or through your in-home retail sector, additional retail licenses will be necessary. Small businesses involving food or drink (such as a home-based bakery) will require a food permit and special authorizations from the health department. The same goes for home beauty parlors or salons. Because pedestrians are less likely to walk past your storefront in a residential neighborhood compared with a shopping mall, you'll also want to invest in marketing materials, including a company website.

Taxes

Home-based businesses sometimes face extra scrutiny from the IRS due to the large volume of write-offs that new business owners take, according to SCORE Counselors for America's Small Business. When starting a home-based business, be scrupulous about documenting expenditures and saving receipts to back up deductions when tax time arrives. Portions of the house designated for business use and used as a tax deduction may not also be used by the family. You'll also need to eventually prove that profits exceed expenditures, or the business may be reclassified as a hobby over time, so be vigilant about keeping accurate financial records.

Other Considerations

Remember that family members or roommates may also share your home with you, creating potential friction if customers are constantly coming and going. Constant distractions from children, a spouse or family pets can also create challenges when starting a home-based business. When possible, set aside a particular area of the house strictly for business-based activity, including designating a separate phone line. This will help establish boundaries between home and professional activities.

References

• Small Business: Checklist for Starting a Home-Based Business
• Business.gov: Home Based Business Resources
• Home Business Center: Home Business Start-Up Checklist
• SCORE.org: Starting a Home-Based Business
• University of Maine: Starting a Home Business
• Entrepreneur.com: The Basics of Starting a Home-Based Business