There are approximately 31 million entrepreneurs in the US, which shows just how innovative we are. And not everyone opens up shop in a physical office space either.
Many Americans run a business from home, which can cut down on costs significantly. Plus, they don’t have to commute, leaving more time to spend with loved ones or on hobbies.
This might sound amazing, and you might be ready to quit your job in favor of starting a home-based business. But hold your horses, as it may not be as easy as you think.
Keep reading for seven tips you need to know before you start a business at home.
- Determine What Business You Want to Run First
Not all skills can transition from in-office to at-home work smoothly, if at all. Even if you can technically take your current job home, you need to see what consumers want and need, as well as how saturated certain industries are.
For example, let’s say your skill is crocheting. This is good if you want to work from home, as all you need are crochet hooks, yarn, some other accessories, and packaging material.
But do some research to see if it’s a viable business. For instance, you might find out that the local area is chock-full of crochet artists, and none of them are making any real profits from their work. In that case, it’s best to find another business idea.
- You Need to Have a Memorable Business Name
In general, you’ll want something short and sweet, so it’s easier for people to remember. Not only that, but it should clearly tell people what you do. Being enigmatic only causes confusion and brings irrelevant traffic to your company.
Don’t be too set on one name, as you might be disappointed. It’s possible that someone’s beat you to the punch, so come up with several options.
Next, check to see if your top name is taken. Not only can you perform a Google search, but you can also check with the Better Business Bureau or the US Patent and Trademark Office.
- Choose a Business Entity Type
There are several business types you can choose from:
- Sole proprietorship
- General partnership
- Limited liability corporation (LLC)
- C-corporation
Each business entity type has its own pros and cons, such as how much you’re taxed and what legal risks you take on. However, do note that if you choose sole proprietorship or general partnership, you don’t have to register your business in the state. That can eliminate a lot of hassle, but the downside is your business name is your legal name (you can file a “doing business as” or DBA if you want to change that).
Speaking with a lawyer or tax accountant can help you determine which entity type is right for you. They can also help you with registering your business and getting an employer identification number (EIN).
- Get the Right Permits
Whether or not you have to register your business, you’ll still have to get the proper permits to operate out of your home. This will probably be different from the ones you’d get when starting a normal business.
Do note that laws will vary between each state, but typically, you’d need:
- Home occupation permits
- Property use and zoning permits
- General business licenses and permits
As you can see, it’s a complicated matter to know which permits to get. Applying for them can be a real headache as well. So it can be worth it to consult with an attorney so they can help get you sorted out.
- Get a Business Bank Account
You can technically run a home business and perform all transactions through your personal bank account. However, it’s a good idea to separate your personal and business finances.
This makes it easier for you to do things like bookkeeping and tax filing. If everything’s in your personal bank account, it can be difficult to sift through each transaction and what type it is. You can also apply for a business credit card so you can easily make purchases without them being mixed up in your personal bank account statements.
- See What Tax Deductions You Can Get
Having a home business comes with many benefits, but the one thing you’ll lose is a pension that you’d normally get from being employed. You also don’t get paid vacation days or sick days, so you need to make up for this by taking advantage of tax deductions.
A tax accountant can tell you more, but in most cases, you can get the home office deduction. You can probably also deduct home office expenses to make your financial burden smaller.
On that note, discuss with your accountant what you can expect to owe at the end of the year. That way, you can slowly put money away, so you’re prepared.
- Get a Virtual Address
Yes, you can work from your house, but don’t use that address in business matters. For one, this compromises your privacy. Plus, it doesn’t look professional.
A virtual address is a service that lets you “borrow” a corporate address. You can have your mail sent there, and you can also use this address when sending out mail or filling out forms. The service can scan your mail (with mailbox services with an online address) or forward it to you, so you don’t even have to go get it yourself.
Know What to Expect When Starting a Home-Based Business
Starting a home-based business can be a great way to break up the monotony in your life. Not only can you pursue a passion, but you can also become your own boss and make your own hours.
However, it’s not a simple procedure, and you need to really think about things before you jump in feet first. With the information in this article, you’ll be able to set yourself up for success!
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