Before You Start Your Home-Based Business: Do Some Due Diligence

One of the significant trends that has emerged as a result of the current economic recession is that home-based businesses are on the rise.

Not only is home-based business ownership often perceived as a rosy

option for laid off or disaffected workers, but for many established

small business owners, the move home is becoming more attractive.

With falling profits and continued overheads such as rent and

utilities, more and more existing business owners are closing the doors

on their brick-and-mortar places of business and setting up shop at

home where they can realize monthly savings in the thousands of dollars.

But as small business experts observe, this is not a decision to be made lightly.

Home-Based Businesses - Step Back Before you Make the Leap

In her Small Business Blog, Rieva Lesonsky picked up on the growth of home-based businesses, but quickly cut to the chase.

In 'Is It Time for Your Business to Come Home?',

Lesonsky, has valuable advice for would be home-based business owners.

First, check whether you can actually run your current business out of

your home, i.e. pay heed to local regulations governing home-based

businesses such as zoning and permitting. And, second, consider this -

are you sufficiently disciplined and content with your own company to

tackle the temptations and potential loneliness that working from home

can bring?

Only you can answer the second question, but it might be worth thinking

back to times when you may have worked from home in the past. If you

found yourself hitting the fridge or sneaking a quick peak at the TV

rather than working your way through your to-do list, working from home

may not be for you. And if you simply thrive on human interaction, then

working from home definitely is not for you. The SBA has put together

an ingenious little assessment tool designed to help you understand your readiness to start a small business.

As for Lesonsky’s first question, you’ll need to check out resources

from your local government to determine what you need to do to legally

start a home-based business. So many business owners think they can

work 'under the radar' at home without paying heed to the regulatory

obligations. Others simply aren’t aware that they actually need a basic

permit to own any type of home-based business. It’s worth

investigating since the fines can be hefty if you are found out.

Below is an overview of the zoning and permit requirements that you

will need to understand and comply with while setting up your

home-based business.

What Zoning Laws Govern Home-Based Businesses?

While most zoning laws have adapted over the past 10 years to phase out

restrictions on home-based businesses, current zoning codes still

enforce a number of restrictions, including:

• Physical Changes and Visibility - Zoning codes often

  prohibit exterior physical changes to the home for the purposes of

  conducting business. Outside business activities, storage, or displays

  are also prohibited, and signage or commercial vehicles may be

  restricted or prohibited.

• Traffic - Most zoning codes restrict the numbers of

  visitors to a home-based business, and the number of employees working

  in the home. Some prohibit employees altogether. Business parking is

  also restricted.

• External Effects - Most zoning codes restrict or prohibit

  nuisance impacts (e.g., noise, odors, glare), and/or prohibit use, or

  storage, of hazardous materials.

• Business Activities - Many zoning codes prohibit certain types of businesses in residential areas.

Zoning laws are determined by your city or county government. Find out

which government agency enforces your zoning laws, and learn the

specific laws that apply to operating home based businesses by using

the state and local search engine on Business.gov.

What Permits Apply to Home-Based Businesses?

This is an area so often overlooked by home-based business owners.

Whether you are a consultant, independent contractor, or run a more

substantive business, such as an in-home day care, you will need one or

more federal, state or local licenses or permits to operate.

Licenses can range from a basic operating license to very specific permits. The government has created a very handy tool - Permit Me - that lets business owners easily identify the licenses and permits required for their business.

Additional Resources

• How to Set Up A Home-Based Business - Quick tips on regulations, marketing, taxes and more.
• 10 Steps to Starting a Small Business
• Choosing a Business Location
• Starting a Home-Based Business: Weighing the Pros and Cons
• Becoming an Independent Contractor: Part 1 - Taking the First Steps
• Becoming an Independent Contractor: Part 2 - Contractor as Business Owner

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley