Can I Start a Business in My Home?: Everything to Know
Yes, you can start a business in your home, provided you obtain the required licenses and complete all the necessary formalities.3 min read
Can I start a business in my home? Yes, you can start a business in your home, provided you obtain the required licenses and complete all the necessary formalities.
Running a business out of your home gives you all the benefits of a small business. You also get to have flexible working hours and certain tax benefits, in addition to not having to travel to your workplace every day. It is even possible to spend time with your family while running a successful business from your home.
Choose Your Business Structure
Most people working from home choose to operate a sole proprietorship business, since it's easiest to start and costs less. For instance, a sole proprietor only needs to file Schedule C along with his or her tax return in Form 1040, whereas corporations, Limited Liability Companies (LLCs), and Limited Liability Partnerships (LLPs) must file a separate tax return for the business.
Retaining the services of a professional tax preparer would mean an additional burden of few hundred dollars every year. If you are from any of the 41 states that levy income tax at the state level, your number of annual tax returns would double.
If you'd like to protect your personal assets by limiting your business liability, you should consider forming a corporation or a limited liability company. In some states, you can even form a one-person LLC, while others require you to have a minimum of two members.
Corporations are costlier to set up and operate. However, if you are planning to expand your business, it's better to incorporate right from the beginning.
If you operate a business along with another stakeholder, you should consider entering into a partnership agreement or forming an LLC or a corporation.
Obtain a Business License
If a city or county requires you to file a tax return for your business income, chances are you will need a business license. You can visit the business administration department or the website of your city or county to get information on the types of forms to be filed. You may be able to apply for a license online.
Get an Occupation License
Some businesses and professions (child care, for instance) may be more regulated in some states and may require you to obtain an occupational or professional license. The licensing requirements and the types of businesses covered vary from one state to another.
Register With Sales Tax Agencies
If you sell a product or provide a service on which sales tax is applicable at state, county, or city level, you will be required to collect the sales tax and pay it to the concerned authority.
Sales tax is applicable in all states except a few, such as:
- New Hampshire.
In addition to the state, many local governments levy local taxes similar to sales tax on certain transactions.
If you deal in taxable products and services, you must obtain a seller's permit, which may also be known as a resale license or a certificate of authority. The state or the local agency that handles sales tax in your place of business issues it. With this permit or license, you will be able to buy products for resale without having to pay sales tax on them.
Protect Your Business Name
If you plan on using a business name other than your own personal name, you must make sure the name you choose is not already in use by some other business. Also, the proposed name must not violate someone else's trademark or service mark.
A business name error can be quite expensive. You may have to change the name and rebuild the identity of your business. Legal consequences apart, using a name similar to that of an existing business can confuse your prospective customers, and your marketing efforts may inadvertently benefit your competitor.
Checking name availability
- To check the name availability, it's better to begin with your local phone book.
- You may also use online directories and portals such as infospace.com, switchboard.com, and theultimates.com.
- If your state provides an online database of corporate names, you can perform a name check here.
- You can use online services like trademarksetc.com to search state and federal trademarks.
- You may also want to use the services of an attorney or an information expert specializing in trademarks and patents.
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