To start a small business from home, an aspiring small business owner needs to be equipped with answers to the following questions
- What are the permissions needed to run a business from home?
- What is the best suited company structure for a small business to be run from home?
- What set-up do you need before starting your business from home?
- What are the business sectors best suited to running a business from home?
- What are the tax benefits for a small business operating from home?
- Are there any grants available to a small business being set up at home?
- What is the impact of sett up a home-based business on your neighbours?
Lets get down to answering these questions in greater detail to understand what is needed
What are the permissions needed to run a small business from home?
Economically speaking, starting your business from your home is a great idea. But, you’ll need to think about the legal aspect of setting up a home-based business.
Use these tips as your checklist:
1. Do you have the necessary permissions to run your business from home?
Before you set up your shop, get the necessary permissions from:
- Your landlord
- The local planning office in case you want to make changes to your home structure
- The local council, in case you:
- Will be getting plenty of customers/deliveries
- Wish to advertise outside your home
- Need a license to run your business (more on this later)
Pro tip: You must also enquire if you need to pay any business rates on your property that you’re using to set up your business.
2. Do you have a general business license or a professional license?
A general business license for home-based businesses is table stakes.
This will help the government to track your revenues for taxation.
So, if you’re thinking of selling anything (product or services), check with your local town/city/country guidelines about how to procure a general business license. Get in touch with your local tax office for more details.
Pro tip: Make sure that your business complies with local zoning ordinances. In most cases, you will get this with your license, but just double-check with your city or county zoning department to be sure.
Other than a general business license, you may also need a state/ federal professional license for ventures such as daycare centres, salons, financial advisory services, and legal services, to name a few.
Here, too, you must contact your state business office or visit their official website to understand how to get a professional license from scratch.
3. Do you have a business insurance?
Given that you’ll be working remotely, you can’t rely on your homeowner’s insurance coverage to insure parts of your business (think: professional equipment, technology, documents, and more).
The business insurance will also cover legal claims made against your business in addition to paying for property damage, data loss, employee injuries, etc.
Typically, there are at least two types of insurance you’ll need depending on how you function and the industry you’re in:
- General Liability Insurance: This safeguards you against lawsuits due to personal injury, damaged products, negligence, etc.
- Business Owner’s Policy: This policy protects your business in case of property/structural damage due to natural or unnatural causes. Meaning if you’re operating out of your home and your premises get damaged (say, loss of income, inventory loss, etc.), having a business owner’s policy can help tremendously.
In addition to the above, you may need to have additional insurance to de-risk any inventory, material hazards etc. that can potentially cause physical harm or damage to your property and that of your neighbourhood.
What is the best company structure for starting a small business from home?
Next up, you’ll want to consider the legal setup of your home business—there are four basic types you need to consider:
| Characteristics | Sole Proprietorship | LLC | Partnership | Corporation |
| 1. Members | Comprises of one single person | May comprise of one or more business organizations/individuals | It may comprise of one or more individuals | Comprises of one or more shareholders |
| 2. Taxation | Revenue is shown on the personal tax return or self-assessment tax returns | Pass-through taxation | Pass-through taxation | C-corp pays corporate income tax S-corp follows a pass-through tax structure |
| 3. Liability | Personal assets are eligible | Personal assets are protected from liability for business-related debts | The owners are responsible for business liabilities | Personal assets are protected from liability for business-related debts |
What set-up do you need before starting a small business at home?
Honestly speaking, there’s a huge laundry list of action items you need to check off before setting up a home-based business.
Here, we’re outlining the most important ones that people tend to forget or ignore:
- Invest your time in finding the right equipment (computer, keyboard, etc.), furniture (desk chair, etc.), lighting setup, etc. Setting up a positive environment is important.
- Keep a tab of your costs and focus on covering the basics first, such as rent, utilities, insurance, wages, marketing expenses, and so on.
- Interview candidates on a holistic level and see if they align with your business’ vision goals. Talk about your brand’s work culture and what the prospective talent can expect from your business.
- Do your research to identify the right target market and see if the business idea is viable. You must also check if your business is truly solving your ideal customer’s pain points. So, get onto Google, YouTube, etc., to ensure your product/service is one of a kind.
- Create a comprehensive business plan with your brand’s name, logo, tagline, pricing, website details, packaging, marketing goals, etc. You can also build a prototype of your product and get primary research to see if people like it or not.
- Review what your competitors are doing and focus on demonstrating your product/service’s USPs via your marketing efforts. Will you use social media to promote your business?
Or maybe you’ll need to create a blog/website for your brand. Marketing on the right channels to the right customers at the right time will get your business going.
What business sectors are best suited for a home based small business?
Well, you can set up nearly any type of business as long as you’re passionate about it.
However, data indicates that AI and blockchain, health food and wellness, sustainably made consumer products, healthcare and mental wellness, E-commerce, personal branding, and professional services, and resale of second-hand goods are recession-proof sectors:
Aside from this, some other unusual yet successful business sectors include pet care, recruitment agencies, virtual business assistants, Airbnb management, print-on-demand, online classes, and so on.
Examples of some small businesses that were successful after starting at home
1. Hart Main (17) started his own company called “ManCans.” This brand sold “manly” scents in a soup can. He started his company by creating candles in the kitchen.
Today, the brand has been renamed “Beaver Creek Candle Co.” and is sold in nearly 150 stores across the United States. What’s more, the candles are made by a developmentally disabled workforce. Inspiring!
2. Fraser Doherty was just 14 when he started making jams from his grandmother’s recipe. From door-to-door selling in Edinburgh, Scotland, to partnering with UK supermarket Waitrose, Fraser has come a long way.
Doherty’s brand is called “SuperJam” and the most amazing part? He runs community beekeeping projects in addition to running free tea parties for older people. Take a bow!
3. A lot of global companies like Google, Facebook, Amazon, and Disney all started from the garage/dorm/basement. These makeshift homes were the perfect setting to start a venture until the companies started scaling uncontrollably. For instance, Jeff started Amazon as an online book store from his garage way back in 1995!
What are the tax benefits for a small business operating from a home?
Here’s a list of deductions home-based business owners can claim on their tax returns:
- Home-related expenses such as homeowner’s insurance, homeowners association fees, cleaning supplies or cleaning services used in business space, mortgage insurance and interest, and utilities, including internet, electricity, phone, and heat
- Direct and indirect repairs and maintenance
- Other business expenses such as business use of a car, capital expenses, employee payments, retirement plans, interest, rent expenses, supplies and materials, etc.
For more information, head over to the IRS site.
Are there any grants available to a small business being set up at home?
The US government offers 60+ grants, loans, and programs for small businesses. You can search for a grant from the federal government at Grants.gov.
The government has specific programs to encourage women-owned businesses, service-disabled veteran-owned small business owners, etc.
In the UK, too, you can apply for 150+ small business grants.
What is the impact of setting up a home-based business on your neighbours?
A business owner’s responsibility does not stop with licensing and permissions at the city/country level. You need to follow the residential neighborhood laws as well for operating home businesses.
So, the first question to ask is this: “Is it legal to run my business from home in this neighbourhood?”
To get your answers, speak to your respective homeowners association (HOA) to see if your business is meeting the local zoning ordinances and neighbourhood requirements.
If you still want to set up a business in your neighbourhood and want to do it legally, get an exception or variance via the appropriate channels. Remember, your chances of getting variance are higher if:
- You won’t have too many customers visiting your premises
- There won’t be a significant increase in traffic flow in your neighbourhood due to your business
- You don’t put up large business signs that may affect the neighbourhood’s character or that your neighbours dislike
Contact your city/town officials to understand the next steps for getting a variance.
Setting up and growing a business from home is fulfilling and rewarding. But make no mistake – it entails a lot of prepping and doing the groundwork.