All across the country, people are taking control of their lives by starting home businesses. From Rick Hart’s Cajun Cargo in New Orleans, shipping seafood nationwide, to Stephanie Heavey in Palatine, Illinois, who designs and sells original fabric doll patterns, to Lisa McElya in Dallas, who publishes the Dallas Party & Event Planners Guidebook from her home, these entrepreneurs are living the new American dream.
They avoid the high overhead and start-up costs of commercial locations while enjoying the flexibility of working from home. If the idea of running a business from your home appeals to you, but you’re unsure where to start, here’s a step-by-step guide to help you succeed.
Step 1: Decide What Part of the House to Use
Choose a space in your home that’s away from family activity. Ideally, this will be a separate room or the garage. However, any area that can accommodate your business supplies, equipment, and workspace will suffice.
Step 2: Determine How Much Time You Can Spend on the Business
Whether you start part-time while managing other responsibilities or dive in full-time, it’s crucial to determine how many hours per week you can devote to your business. Create a weekly schedule, identify where your business fits in, and make sure you have enough time to meet your goals.
Step 3: Decide on the Type of Business
Make a list of your hobbies, work experiences, and resources that could be useful in a business. From this list, brainstorm possible business ideas. Eliminate any that don’t excite you or meet a specific need.
Step 4: Choose a Legal Form
The three primary legal structures are sole proprietorship, partnership, and corporation. The sole proprietorship is the simplest and most common. It offers full control and ease of setup, but be aware that you’ll be personally liable for any debts or legal issues.
Step 5: Determine Where the Money Will Come From
Funding your business can come from personal savings, loans, or investors. Starting small and using your savings can help you avoid the stress of debt. Remember, it’s often challenging to secure a loan or investors for a home-based business until it proves successful.
Step 6: Gather Information
Spend some time researching home-based businesses. Visit your local library or bookstore to find books on business basics and your chosen industry.
Step 7: Check on Zoning Restrictions
Contact City Hall to learn about zoning regulations that apply to home businesses in your area. If you rent or live in a condominium, check your lease or homeowners association rules to ensure you’re allowed to operate a business from home.
Step 8: Pick a Business Name and Register It
If your business name differs from your own, file an assumed name certificate with the county. This step is crucial before you invest in marketing materials. It’s a low-cost way to protect your business name and avoid legal complications.
Step 9: Write a Business Plan
A solid business plan is your roadmap to success. It should detail what you’re selling, your qualifications, target customers, marketing strategies, and financial needs. This plan will guide your actions and help you stay focused.
Step 10: Get an Identifying Number
If you’re the sole proprietor and have no employees, you can use your Social Security number or obtain an Employer Identification Number (EIN) from the IRS. If you have employees or are setting up a partnership or corporation, an EIN is mandatory.
Step 11: Obtain a Sales Tax Permit
If your products or services are taxable, you’ll need a state sales tax permit. Contact your local tax agency to find out if you need to collect sales tax, and they’ll provide the necessary forms and information.
Step 12: Obtain Licenses & Permits
Don’t overlook any required licenses or permits. Some cities and counties require a general business license, and others have specific regulations, especially for food-related businesses. Check with City Hall or your local Chamber of Commerce for details.
Step 13: Select Business Cards, Stationery, and Brochures
Your business cards, stationery, and brochures make a lasting impression on customers. Invest time in choosing the right design, colors, and paper. If you’re unsure, consult a professional designer or a trusted printer.
Step 14: Open a Business Checking Account
Research local banks to find the best deal for business accounts. Look for one that offers services you need without high fees. Also, consider getting a credit card in your business’s name or reserving a personal credit card solely for business expenses.
Step 15: Set Up Record-Keeping Systems
Organize a simple yet effective bookkeeping system. Use a binder with monthly sections for income, expenses, receipts, and bank statements. Keep detailed records of business mileage, correspondence, and client information. IRS publication #583 can provide further guidance.
Step 16: Check IRS Requirements
If you meet IRS guidelines, you may deduct a portion of your household expenses as business expenses. Review IRS publication #587 for more details and familiarize yourself with forms like Schedule SE and 1040 ES, which may be required.
Step 17: Outfit the Business
Make a list of essential items for your business. Before purchasing anything new, see what you can repurpose from around the house. For additional needs, consider second-hand options like classified ads and garage sales.
Step 18: Decide on Telephone Requirements
Contact your phone company to explore the cost of a business line. If a separate line isn’t feasible, check the regulations for using your personal phone for business. Keep records of business-related calls for tax purposes.
Step 19: Check Out the Post Office & UPS
A post office box can serve as your business address, offering privacy and professionalism. While there, inquire about postal rates, especially if you plan on bulk mailings. For shipping packages, consider UPS, which is often cheaper than standard postal services.
Step 20: Purchase the Necessary Insurance
Consult with your insurance agent to see if you need a rider on your homeowner’s policy or a separate business policy. Ensure you have adequate coverage for personal and product liability, and shop around for the best rates.
Step 21: Organize the House & Yourself
To maximize your time for business, streamline household routines. Hold a garage sale to declutter, assign household duties to family members, and create a planning notebook for appointments and tasks. Stick to a work schedule to stay focused.
Starting and running a home business can be a fulfilling and profitable endeavor. By following these steps, you can lay a strong foundation for your business, enabling you to enjoy the flexibility and satisfaction of working from home while building a successful venture.
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