5 things to consider when starting a home business

Today more than half (52.2%) of all businesses are conducted from home, according to the U.S. Census Bureau. Starting or operating a business from home offers many advantages, including cost savings and convenience. But before you settle on this location for your business, be sure to ask these five important questions:

1. Can I make my business work in the space I have?

The type of business you run dictates the amount of space you need. If you’re a freelancer, small desk space may be sufficient. If you’re an interior designer, you likely need more space to welcome clients and display samples. If you’re a plumber using your home to schedule appointments and keep your books, you probably need even more space to store your supplies and equipment in addition to any administrative space.

Be realistic in assessing the amount of space you need and whether your home can accommodate your needs. It may be possible to adapt some space for business needs, such as transforming a garage, basement or attic into work or storage space.

2. Will my family be okay with me working from home?

It may sound great to your family that you’re in the home for work, rather than commuting elsewhere, but there’s more to it. Your family must understand that you’re not on-call for their needs while you’re doing business.

If you have very young children, you may need child care – in or outside the home – for them so you can work. A conversation with older children, spouses, partners and others who live with you is essential before you commit to this work arrangement. Start by asking whether they think you’ll always be available to them—to drive them somewhere or attend a school function—just because you’re around. This will help you and your family to set expectations about the work arrangement.

3. Can I legally run my business from home?

Zoning rules in your city or town may restrict the type of businesses that can be conducted in a residence. If you’re working by yourself at a computer, likely you’re okay. But if the business entails customers and clients coming to you, there may be rules that block you, or at least limit the number of business visitors because of parking and other requirements (e.g., child-care businesses may be limited to six or fewer children). Zoning laws aim to bar businesses in residential areas that are nuisances to neighbors, such as those that bring noise, odors and lights.

There are other legal restrictions to check out:

• Homeowners association (HOA) rules. If you live in a community with such an association, check the rules on home-based businesses. For example, the rules may bar you from parking a commercial vehicle in your driveway.
• Codes. Building codes and other rules may impact whether you can run your business from home. Health department rules may, for example, restrict or impose requirements on caterers preparing food at home.

4. Can I put up signs?

You want customers to be able to find you, but local signage rules usually dictate the size and location of permissible displays. Check with town or city hall to find out whether you can put up a sign in front of your home and what restrictions on size and placement apply to you.

5. Does my homeowner’s policy protect my business?

There are two main protection issues: loss of property and injury to third parties. Review your homeowner’s or renter’s policy to see whether and to what extent you are already protected. Likely you’ll need either:

• A rider on your existing policy to cover your business needs. For example, if you store inventory, you want your policy to cover losses in case of damage, destruction or theft. If you have occasional business visitors, make sure the policy covers you if they’re injured in your home.
• A separate business owner’s policy (BOP). This policy can be tailored to meet your financial exposure for your business, even though you have a homeowner’s or renter’s policy.

Conclusion

I’ve been working from home for more than 25 years and the arrangement has been wonderful for me. I was there when my children came home from school and was there when any were ill. But even though they are grown and out of the house now, being a home-based business continues to be convenient and cost-saving place to operate may business. So working from home is a great option for many individuals. If you want to become one of them, take the time to think through all of the concerns that this location presents. Recognize that if your business grows, you may want or need to leave the comfort of home and move to commercial space.

This information is provided for informational purposes, may not be applicable to all situations, and is not intended to provided legal, tax, or financial advice. For specific advice about your unique circumstances, you may wish to consult a qualified professional.