Home-based businesses can either be independent businesses or telecommuting arrangements where individuals work for a major corporation from their home. Telecommuters, by virtue of the fact that they are employees, have a different set of issues than home business owners in terms of income and expenses. However, in terms of time management and office space, they have much in common. Both face similar advantages and disadvantages in working out of their home.
| Advantages | Disadvantages |
| A home-based business allows you to eliminate the cost of an office, a major expense for most small businesses. Also, most home-based business owners are eligible for a partial write-off of their house payment, utilities, and maintenance costs, given that you follow the tax laws on this meticulously. | One of the greatest challenges of working from home is to set definite boundaries between work and family obligations. Friends and family members may have a difficult time adjusting to the fact that you have to work while you are home. As long as you are clear about your expectations, you should be able to eliminate most of the conflicts before they occur. |
| Work takes up a lot of our lives. Home-based businesses can offer flexibility and freedom often not found in operating a business outside of your home. | Many home-based business owners have difficulty dealing with the isolation of working at home. You must be self-disciplined to stay motivated and working towards your business goals. |
Legal Regulations
In working from home it is important consider the legal regulations governing your business.
Most of the federal and state laws governing small businesses also apply to both home-based
businesses. However, there are several additional, special legal regulations that home-based
businesses may need to follow.
Zoning Regulations
It is important to research your city's zoning regulations. Certain areas within your city may have zoning restrictions which prohibit a small business owner from operating out of his or her home. If you violate these restrictions, you could be fined, shut down, or both.Product Restrictions
Home-based production of certain products such as fireworks, drugs, poisons, explosives, sanitary or medical products, and toys is illegal. Some states also prohibit the production of food, drink, and clothing in a person's home. Find out what product restrictions apply in your area.Work Certificates or Licenses
Some states require that you obtain a work certificate or license when working out of your home.Registration
Like other businesses, you will be required to register your business name and obtain a sales tax number before you can officially start operating your business.Employees
If you have any employees working for you, it is important that you comply with employee health and safety laws even though you are operating out of your home.
One big issue for business owners operating out of their homes is how to compute tax deductions for the space they use for operating their business within their home. This can particularly confusing for daycare and bed and breakfast businesses. The IRS can be very sticky on this issue. Familiarize yourself with IRS Publication 587, Business Use of Your Home to be certain you are following all the federal regulations to the letter. This publication also contains information on the business use of your home for telecommuters.
States also each have their own regulations. Visit your state business information center to learn more about what is required where you live.
Additional Resources
For those of you who are looking for what business might be good to start, take a look at
Choosing the Right Business to learn more about
finding the right business for you. If you have a business in mind, but just want to make
certain you are setting it up right, take a look at Starting a
Business for a review of all the steps that one should cover in getting a business off the
ground.
