Nearly half of all small businesses in the United States are run from home, and that number is growing as the population ages and makes career changes. Although the convenience of operating a home based business is hard to beat, you still need to be sure you follow all local and tax laws while operating your business. Here are some considerations:
- Zoning Regulations – Municipal or county zoning laws differentiate between residential and commercial areas. If you are conducting a home based business that attracts a lot of foot traffic, or you want to post a sign in your yard advertising your business, you will likely need to get permission from your city or county to do so. If you have a homeowners association in your neighborhood, you probably will need their permission also.
- Licensing and Permits – Some cities require that a home based business limit the number of employees to one or two people or limit the number of customers that can come to your door. You will need to check your local ordinances to see what regulations exist for home based businesses and if you need a permit or a license to operate your business from home.
- Tax Laws – You can deduct the cost of having an office in your home, but the IRS has strict rules about what can and cannot be deducted and doing so is a common red flag for tax audits. Space for your office can only be used for that purpose. Check with your tax professional for IRS guidelines on deductions for home offices.
- Insurance – You need to ensure your homeowners insurance will cover any claims if you have employees or clients that come to your home and are injured. You may need to take out a separate policy or have a rider attached to your policy for business protection.
To be sure you have a firm understanding of the rules and regulations related to starting and running a home based business, you should consult with a trusted business attorney.
If you’re a small or mid-size business owner, call us today or CLICK HERE to schedule a consultation with our business attorney. Our office is conveniently located in Modesto, California and services clients throughout the Central Valley and Bay Area, including Stockton, Merced, Santa Clara, San Jose, Oakland, Pleasanton, Tracy, and Manteca.