What You Need to Know About Operating a Business from Home

For people interested in becoming an entrepreneur, deciding where to run a small business is an important step in the business plan.

It’s a major financial decision and investment, and depending on your line of work, there are different business operation requirements and needs to be successful and legal.

It’s generally legal to operate a business from your home. There are, however, different legal requirements depending on the type of trade you’re in, what you’re offering, where you’re located, and other factors.

You’ve heard the stories of CEOs of large successful companies starting their business in their garage. If you’re worried that operating a business from your home makes it less legitimate, don’t be. It’s much more common than you’d think, and there are a few great benefits that come with it, such as flexible work hours, no commute, and potential tax benefits.

You also reduce overhead costs, as you aren’t paying for an office space or additional phone lines, internet, renter’s insurance, etc. It gives you more peace of mind financially if you know that you can test your business idea before making a dent in your bank account.

A surfacing trend is of stay-at-home parents beginning a side hustle that they can operate from their home. If you’re unsure about starting a full-time home operation and worry about balancing being a parent and a business owner, then running your business from your home is definitely your best option to start with. As your children get older and need less nurturing and attention, you can think about expanding your side hustle into a full-time business from home.

Here are a few questions you should consider to make the best choice for your business:

1. What type of business do you want to start?

   This is the most important question to ask yourself if you’re considering running your small business from home, even if it’s in the start-up phase. If you won’t have customers/clients on-site, i.e., you sell your services strictly online, then you should have no issues with running your business from home. Basically, if you won’t bother neighbors with noise, parked cars, and large groups of people, you should be good to go.

   However, if you need to invite customers on-site, there are few legal precautions to take.

   If you are renting an apartment, check your lease to see if you are allowed to run a business from your building. If it’s not stated in your lease, contact your landlord. The same thing applies if you rent a condo—ask the building owner about it.

   You’ll also need to check if your area has an ordinance covering home-based businesses, because they may limit the number of employees you’re allowed to have on-site.

2. How many employees do you need?

   If you need to hire people to help you, you want to make sure you have enough space to create a working environment for them where they feel comfortable and productive. If you need a lot of support, then you should probably think about renting office space.

3. How much space do you need for equipment and necessities to run your business?

   Besides employees (if you need any), think about what equipment you need and if you have enough space for it. If you need to expand your home to make additional room for your business, you’ll need to contact your local land use department regarding zoning laws in your area. Additionally, permits may be required if you’re going to expand your property.

4. Where do you live and what are the demographics?

   You want to make sure that your neighborhood is a sensible place for the type of business you want to start. If you intend to have customers on-site, you should ensure that you are in a convenient location to get to, can offer plenty of parking, and have an attractive property. First impressions are important, and people will automatically judge your business based on how it looks on the outside and inside.

   If you are in a trade that is offering in-person services on your property, it shouldn’t be small and cramped. You’ll also need to make sure you have a separate room for office space, a waiting room, and a consulting room.

   Considering your area’s demographics is very important because it can tell you about purchasing behaviors and habits for your target customers. If, for example, you are selling a product for a millennial age group but you live in a town with residents whose average age is 50+, it’s probably not the best choice to operate your business from home.

   Basically, you need to think about whether or not you can replicate a professional office setting in your home space and if you can attract the right clients in your area.

5. How much traffic does your area get?

   Traffic is another important factor that goes hand-in-hand with demographics.

   If you are trying to get customers to visit you, location is a big factor to consider. More specifically, you need to think about how much traffic comes through your neighborhood or town. A way of drawing in customers is dependent on how many people are typically around.

   If for example, you want to run a hair salon, but there are usually not many people coming through your area, that’s not going to be viable for sustaining your business. You’ll need to scout for another neighborhood or even a nearby city where there will be enough people around to notice your business.

6. Would a home-based business negatively impact your family?

   Even if it’s just you and your partner, think about how running a small business from your home will impact them (or family members who live with you). If your space is big enough so that your family won’t be stressed by strangers coming into the home, that should work out OK.

   You’ll also want to consider if you’ll be able to separate work life from family and personal time when running your business from home. Communicate with your family members and consider whether or not the environment will be good for you to focus on work.

7. What are your state’s business licensing requirements?

   Each state has its own unique requirements for running a business from home, including licensing and registering a business, depending on the type it is. If you are running a sole proprietorship, it’s likely you’ll be fine to run a business from home. However, if you’re registering as an LLC, partnership, or corporation, you may need a business license to operate from home.

   The most important thing to do is make sure you check with your local government on the rules and restrictions that may apply to run a business from your home. If you’re too afraid to try, then entrepreneurship might not be the best fit for you. So aside from all the questions listed, ask yourself if you can accept failure as part of the process for running a business at home.

   When starting your home business, don’t forget to get a business insurance quote to ensure you're covered.