What You Need to Know About Turning Your Home into a Business
This is a guest post by Tina Martin.
Your home is where you eat, sleep, and relax, but it can be where you work as well. In fact, according to Fit Small Business, half of all businesses in the U.S. are home-based. If you have drive, motivation, and a self-starter attitude, and the flexibility and creative freedom that comes with being your own boss entices you, the following are some home-based business knowledge nuggets worth noting.
Think About Space
You’ll need an office, but depending on the type of business you’re starting you may need more room than that. For example, a home daycare or catering business requires more space than a photographer or accountant. Utilize those spare rooms, as well as rooms that are only used once or twice a year (dining room we’re looking at you).
Short on space? No problem. Apartment Therapy points out even the smallest corner or closet can be turned into a workspace. If you find that you need more elbow room than your home can provide, do some homework on the local market. As a starting point, Redfin notes the average selling price for homes in Fort Worth came in at $255,000 last month. Sure, it’s a big leap, but if you’re serious about your business it might be the leap you need to take.
Check the Legalities
Before you start putting plans in motion, make sure your neighborhood doesn’t have a law in place that prohibits business operation. Check with your city as well to determine if there are zoning laws that apply, and what permits, licenses, or variances (if any) are needed to legally run your business out of your home.
Another legal piece to tend is your tax ID so that you don’t have an IRS run-in. And check that the business name you choose is available as well. It might not seem like a big deal, but a local and national trademark search is recommended so you don’t get a call from a lawyer.
You Get a Deduction
Taxes aren’t always a good thing, but when it comes to home business space, you’re allowed to claim $5 per square foot, up to 300 square feet. You can deduct office supplies, office upgrades, mileage, business travel/trips, and even client coffee meetings, too.
With all these deductions, it’s crucial that you store all receipts in a physical filing system or electronically (both if you want to stay on the safe side). There are rules for how much of each you can deduct, as well as special forms to fill out when tax season rolls around.
To avoid any confusion, the safest route is to work closely with a local accountant to keep your books in order. They not only ensure you’re following the rules, but can help you come up with a systematic filing system so that your business paperwork stays in order. Patriot Software notes the average small business spends $1,000 annually on accounting fees, so keep that in mind as you prepare your budget.
Set Up a Separate Business Address
A business address is public knowledge, so you might not want your home address floating around. You can certainly use a PO box as your business address, but you may prefer an actual address if you want to up your professional image and credibility.
Instead of using your home address, use USPS’s Street Addressing option, which enables you to use the address of the post office. You can do something similar at the UPS store by renting a mailbox and using that store’s physical address.
If your business is a limited liability company (LLC) or corporation, you have to have a business address. You can still maintain your privacy by using a registered agent address, which is a person who receives business paperwork, government documents and such on behalf of your business.
So you’re contemplating turning your home into a home-based business. Congrats! It’s time to do your homework though. You have a home, so you’re one step in the right direction, but there’s more to it than that. Become knowledgeable with the legalities and not-so-fun stuff first, and then you can dive into the creative side.