For many small business and startup owners, apart from the operational costs, real estate can be a huge impediment to growth. Therefore, many small businesses are run from residential areas. Consultants, single programmers, doctors and even advocates run their work from homes.
While running a home-based business has it’s obvious perks, you should be aware that you need other permissions to run your venture from home. Below are five tips that will help you legalize your business.
Choose a Business Name
The first step to legalizing your business is carrying out a search for your business name and clearing the trademark. Your Secretary of State’s office should be your first stop in your state and county, and then carry out a national trademark search.
If you find out that somebody else is already using the name you wanted, consider paying a service to carry out a comprehensive name search for you. The advanced search will ensure that you are not infringing on another person’s or business’ trademark. Moreover, you don’t want to change your business name once your business is up and running.
Pick the Right Business Structure
Get in touch with a tax professional to determine if your business’ structure is legal. While there are advantages to starting as a sole proprietorship today, there are tax advantages to creating an LLC or S-Corporation. Plus, forming a Georgia LLC or corporation for instance, has the added advantage of legitimacy – your clients will not worry about working with “some guy holed up in his basement.”
Get Your Tax ID
As a sole proprietor, you can use your Social Security Number when dealing with customers and vendors for their records. However, it is advisable that you get a tax ID, commonly known as an Employer Identification Number (EIN), from the IRS.
The last thing you want is your personal Social Security number floating about all over. In addition, it is more professional when your business has an EIN – a requirement for corporations or LLCs.
Get a Registered Agent
You may not want your clients to find out that you are working from home. However, since a legal business address is public record, you may want legal and business notices delivered elsewhere.
For an S-Corporation or LLC, you can substitute your agent’s address in place of your home address. Furthermore, if you are not incorporating, you have the option of using a P.O. Box or a mailing firm for a Doing Business As (DBA) entity.
Get Necessary Licenses and Permits
As a home-based enterprise owner, you should be proactive about checking on the required local permits. In some cases, and states, you may be required to hold a business license before you can start dealing with clients. For example, a cupcake baker working from home may require undergoing a health inspection and there might be zoning rules in force.
Some cities and counties have stringent zoning requirements for home-based business, especially when working out of a residential building. Your local zoning office should be in a position to furnish you with details on the permits required. In general, as a home-based business, you cannot have your clients come in and out of the residence like a commercial business.
Always handle your licensing and permits issues at the very beginning. Delaying doing this will likely see you pay penalties and back payments that can ruin your business.
Running a home-based business might seem as the simplest route to starting your business. You can easily convert the extra bedroom, attic or basement to an office space, reducing your overhead costs dramatically. However, you should ensure that your business is legally registered to reap the full benefits.