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Home-Based Business

Is running a business from home a good idea?
Zoning laws and other legal issues
Equipping your home office
Insurance
Tax deductions

Is running a business from home a good idea?
Working at home may sound like a good idea, but it isn't for everyone. There are several things you should consider before starting your own home-based business:

• Family: Having a home-based business can be stressful for the whole family. Hold a meeting to discuss the implications of working at home, such as household duties and money issues.
• Isolation: Most home-based businesses have few or no employees. Depending on the amount of contact you'll have with clients, you may be stuck in solitude all day. If you're the type of person who enjoys working alone, that's not a problem. But if you thrive on social interaction, you may want to reconsider this idea.
• Distractions: Kids, housework, and the TV are not conducive to hard work at home. Take all possible distractions into consideration and decide if you will be able to get the job done.
• Nature of the business: For some occupations, it's just not possible to work at home. If you're going to have to store large amounts of inventory or have lots of customers coming to your home, you'll probably want to relocate to a commercial location. Some services such as web design and accounting are good choices for home-based businesses.

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Zoning laws and other legal issues
Many cities and counties have zoning laws that regulate whether you can operate a business from home. Selling retail goods, having employees, displaying prominent signs, the increase of traffic, and storage of dangerous materials are most often concerns of these laws. You may be required to obtain a home occupation permit if there's a chance you could violate the zoning law. Check with your city clerk for more information. Also, additional rules may be placed upon you if you rent or belong to a homeowners' association. Contact your landlord or review your lease/contract to make sure you have permission to run a business on the premises.

It's a good idea to inform your neighbors of your plans to start a business before actually opening your doors. Not only is it the considerate thing to do, but it may also keep you out of trouble. Increased traffic and other concerns may drive the unknowing neighbor to contact the police department. Always try to minimize your business's negative impacts on the community.

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Equipping your home office
The ideal space for your home office is obviously a separate room with a door, but if that isn't an option, you may have to settle for a secluded corner. Privacy is important though, so if you don't have a separate room, use a screen or curtain to separate your business from the rest of your home. Also, it's best to have a separate entrance for your office so customers don't have to walk through your home.

Selecting the proper desk and office chair is an important step. Your desk should have sufficient space for the equipment you'll be using, but should not take up your entire office. A comfortable chair is important for ergonomic reasons. Make sure it's adjustable and test-sit several different models.

These days, it is essential to have a computer to run a business. The first thing you must decide is if you want a laptop or a desktop. If your business requires you to travel a lot, or if you want to be able to take your work to client meetings, a laptop is a logical choice. If most of your work can be done by just sitting in front of your desk, consider buying a desktop. Before you buy a computer for your office, think about what features you need as far as memory, processing speed, etc. It might be tempting to just buy the "best," but you should tailor your technology to your tasks, not your taste.

Another consideration is that of software. At the very least, you'll need a word processing program and other basic applications. A popular choice is Microsoft Office, and it may come already installed on your computer. Accounting software can help you keep your books in order, and if you're going online you may want a web design program. Other software options will depend on the nature of your business.

A printer is another home office essential. Depending on your needs, you'll have to decide whether you want a laser or an inkjet. Laser printers are more expensive in the beginning, but they also deliver higher quality, speed, and lower variable costs. On the other hand, inkjet printers allow you to print in color and the initial hardware cost is lower. However, inkjet cartridges need to be replaced often, which can be expensive.

Depending on the nature of your business, you may benefit from having a fax machine, scanner, and copier in your home. An alternative to buying several different office machines is to purchase a multifunction fax/scanner/copier/printer. They are both convenient and space saving.

Having a separate phone line for your business may help to solve some problems. For instance, you probably don't want your small children answering business calls. When you answer your business line, you'll know to use a professional greeting. It's also useful in determining which calls are business and which are personal after hours. In addition, your business should have its own answering system for when you can't take calls. An answering machine is one option, but voice mail may be better. Most phone companies will offer voice messaging for a nominal monthly fee. Make sure your recording is professional and concise. Don't forget to include hours of availability and other pertinent information in your greeting.

Cellular phones and pagers are important communication tools. It may make the customer feel more secure to know that he or she will be able to reach you in case of an emergency. Like everything else, your decision to buy or not to buy lies in the nature of your business.

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Insurance
Inventory, equipment, and customers are all added risks that your current insurance policy probably doesn't cover. As a home-based business owner, you'll need to investigate liability and property damage coverage. Some different types of insurance are:

• Business owner's policy: This policy includes both liability and property damage coverage. Some duplications may occur between this and your homeowners' policy.
• Home office policy: A combination of homeowners' and business insurance. It covers general business liability, some off-site property, fire, and theft. This may be a good choice for a small company with just a few visitors each week.
• "Business pursuits" endorsement: An addition to your homeowners' policy that provides the least protection. It is not recommended if you have customers in your home or if you have expensive equipment.

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Tax deductions
As a home-based business owner, you can certainly deduct business expenses from your taxes, but you may also be able to deduct a portion of your household expenses. The catch is that your home-office space must be used "exclusively" and "regularly" as your principal place of business. You may need an accountant to decipher the exact meaning of these IRS terms. To calculate your deduction, you first need to figure out the percentage of your home you use for business purposes, either by square foot or the number of rooms. Then use that same percentage to find out how much in utility, property tax, and insurance expense can be deducted from your taxes.

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