Starting Your Home Business: The First 9 Things You Should Do
You’ve landed on a super idea for your home business and you’re eager to get it up and running. But there are several important things that need your attention first, before you declare yourself open for business.
#1 – Check Out What Permits/Licenses You Might Need
The type of permit or general business license you might need, if any, to run your home business depends on your local county and township. They set requirements for specific business activities. A special permit may be needed if your new business involves food handling, hazardous materials, or outside clients or employees entering your home.
While a permit or license is generally easy to obtain, it’s good to find out sooner rather than later. That way, you can get the paperwork process underway before you start your business and plan for any licensing fees – as well as any home business inspections that come with some special permits.
#2 – Check Zoning Laws
Be sure to check zoning laws before you start your business – especially if you have neighbors nearby. Check with your town or city planning commission for zoning rules.
Just because you're working in a residential area doesn’t mean you’ll be violating any zoning laws. A zoning issue is more likely to come up if your business is more outward-facing, like one that deals with the public, has employees working out of your home or keeps odd business hours.
#3 – Prepare Your Home Office
As easy as it seems to just run your business from your kitchen table (and that might even work depending on your type of business), don’t do it. It will serve you well to identify and create a work space for yourself, especially if you have children or other family members living with you.
This means putting together an office with the tools you’ll need to do business before you start making bids or sending out any invoices. For example, you might need to invest in office equipment (or check that yours is in working order), including any software that might help you run your business more professionally, such as accounting or project management software.
#4 – Upgrade Your Home-Based Tech
This is right there with setting up a business office in your home but more specific to having the right level of communications tech in place before you start. For example, look into upgrading your internet speed or service, or getting cloud storage and backup applications that can sync your devices. Check with your internet provider for business service options. You may also want to consider getting a business phone line, which will come with a lot more features than a typical residential line.
#5 – Determine Legal Type of Business
The “type” of business depicts the way it’s organized as far as taxes and legal liability, your purpose and situation, and the control of your business profits and losses. There are three basic types: a corporation, operated totally separate from its owners; multiple owners, which includes partnerships and limited liability types; and sole proprietor.
You’ll need to research what’s best for your business and situation. Check with the Secretary of State office to get more information, including how to register your business online. (For more guidance, you might want to seek advice from an attorney.)
#6 – Consider a Federal Tax ID number
You might want to get a federal tax ID number. Called an EIN, an Employer Identification Number is a unique tax ID number used by the IRS to identity businesses. Most sole proprietors aren’t required to get one (you can just use your social security number) but having one can have its benefits, from making business accounts easier to set up to adding a layer of personal financial security.
#7 – Look Into Insurance
You may want to check on getting business insurance, because your homeowner’s or rental insurance may not cover what you need when it comes to your business. The type of coverage you need for your home business will depend on your business or industry.
Types include coverage for your business property, such as equipment used in your office and any other equipment used in your business (such as your oven if you’re a baker).
#8 – Open a Business Banking Account
It’s a good idea to set up a banking account that’s separate from your personal account, before you start accepting or paying money out on behalf of your new home business. A business account is good for tracking and appears professional to customers and vendors.
#9 – Create a Business Plan
This probably should be #1, so if you haven’t already done so, develop a business plan before you start your business! It doesn’t have to be lengthy or complicated. Even a one or two-page document can serve as your guide and is the most-asked-for document when talking with prospective lenders or investors. A foundation for your business, your business plan can be as simple as outlining your financial goals, your anticipated expenses, who you’re going to sell to and what tools you’re going to need, such as a website or social media accounts.
Closely Related: Why Take 10 Minutes to Get an EIN for Your Business?