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Last Updated on January 20, 2024 by Work In My Pajamas
Starting a home-based business offers a wide variety of benefits. You get to be your own boss, choose your own working hours and decide on the pace that suits you the best. But, just because you’re starting a business from the comfort of your home doesn’t mean you’ll manage to avoid the government’s radar.
Even though home-based businesses require a lot less paperwork and can avoid a lot of legal obligations that large companies must face, they must still obtain proper business licenses, permits, legal documents and zoning approvals in order to operate legally.
Aside from being obliged to pay taxes, as a business owner, you’re bound by law to register a company and obtain proper licensing for it. That’s why you must properly register your home business and allow it to develop and grow in the future. Here are a few tips on how to register your home-based business.
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Decide on a business structure
A business structure plays a vital role in how much licensing, permits and paperwork you’ll need to register a home-based business. It also defines how your business will develop and grow further. To most entrepreneurs who start their own business from their homes, the sole proprietorship structure is the most appealing. This business structure requires the least paperwork and it’s the cheapest option. However, sole proprietorship brings a lot of responsibility and liability to the business owner.
Simply put, every bad decision you make, every oversight and anything that goes wrong, goes back directly to you and you must bear the legal claims made against you. A more suitable business structure for home businesses would be a limited liability company (LLC) or a partnership with another home business. These structures require more paperwork and additional fees, but they offer more flexibility for both businesses and their owners.
Register a name for your business
As same as any other company, your home business will require a represented name that will help it become identifiable to both future customers and business associates. A business name is also essential for obtaining a tax ID number for your company, in order to file and pay federal or local taxes. However, if you’re planning on using any other name other than your own as the name of your company, you’ll have to register that name with a government agency.
You can check for names manually or enlist the help from companies that can help you register a company online and help you obtain the necessary legal documentation as well. Also, you must check if the name you’ve chosen for your business is already in use or protected by a trademark or a service mark law. If you fail to do this and register a name regardless, you may face legal claims and be forced to change your business name at the very least.
Obtain a business license and permits
Every business requires licenses and permits in order to operate legally. The same rules apply to home-based businesses, even if you’re only operating online. For instance, every business requires a general business license to identify its operation with the local jurisdiction. Also, it requires sales tax registration if you’re in the business of buying and selling goods. In addition, if you’re offering services such as legal guidance, hair styling, architectural counseling etc., you’ll need certification, as well as professional or occupational licensing.
Furthermore, depending on the nature of your business, you might have to obtain additional permits and licenses for your home business. For example, if you manufacture food at your home, you’ll need a health inspection certificate. Aside from usual licensing, a home-based business requires a home occupation permit. This permit prevents you from disturbing the environment in your neighborhood, such as increased noise, traffic and so on.
Familiarize yourself with the local zoning laws
Home-based businesses face a unique issue which is operating in the residential area. That means that specific business operations, such as operating heavy machinery are forbidden in a residential area. If you’re about to start a business from home, you have to familiarize yourself with the local zone laws and register your business with the local zoning agency. Zoning laws differ from countries to cities, but their ultimate goal is to maintain the area or a zone environment in clearly defined order.
For example, in residential areas, you must maintain peace and quiet in order not to disturb the local residents. These laws will impose limitations on your business, which you must be aware of before you start a business in the first place. For example, you can’t have a cow ranch in your backyard if you live in the suburbs or have a car repair shop in your garage. That’s why you should check in with the local zoning office and determine which business operations are allowed in your local area.
Registering a business is important, even if you’re running a business from your home. By registering your home-based business, you ensure that your company operates legally and that it has all of the necessary business licenses and permits. That way, you can grow your business without having to worry that you’re breaking any laws.
