General Guidelines for Getting Your Home Business Up and Running
All businesses require basic procedures be completed before they can be considered official. Home-based businesses can center their operations around most anything: programming, consulting, jewelry making, and even windshield repair.
The real key to success is making sure that your small business is well-grounded. After all, the last thing you want is for your business to take off and then realize that you are not protected. Rather than try to find these answers on your own, we’ll provide you with general guidelines on steps to take to get your business up and running.
Select an Appropriate Business Structure
Hire a Tax Professional or Certified Public Accountant before determining your home business’s legal structure. While it’s possible to begin doing business as a sole proprietor as early as today, there can be tax benefits to forming an S-Corporation or LLC. Moreover, having a corporation adds a degree of legitimacy to your small business. Generally, LLCs may provide some legal protection and only require a minimum amount of paperwork, so it’s definitely an option to consider.
Choose the Right Business Name
First, consider a national trademark search. Why go through the trouble? To ensure that you’re not infringing on another company’s trademark!
Certain business structures such as a corporation, limited-liability company, or a limited-liability partnership may need to be registered with your state government. In some states, if you are a sole proprietor using your own name to transact business, you may not need to register.
Many seasoned entrepreneurs would agree that changing your business name once you’ve already started doing business is counter-productive. Typically, you can address this problem altogether by choosing a unique, imagined name that isn’t already in existence. Yet even then, it’s better to be safe than sorry and double check, just in case.
Acquire a Tax ID
Technically, a sole proprietor can provide their Social Security number to customers for record-keeping purposes, but it’s still best practice to get a tax ID. Also known as an EIN, it acts like a regular Social Security number, except it is used strictly for business purposes.
A tax ID looks more professional than a regular SSN and helps you build business credit. Additionally, acquiring an EIN helps to keep your SSN less vulnerable to hackers and competitors on the internet. As an EIN is required for business corporations and LLCs, why not opt for the professional route and obtain one for your sole proprietorship?
Obtain Necessary Permits and/or Licenses
It is your job as a home business owner to check in on any permits or licenses required to run your operations. For example, if you’re selling cakes, then it’s likely that your residence will legally be obligated to undergo a health inspection. There may also be zoning rules associated with starting your business. Get these handled immediately. There can be severe penalties and back payments that you’ll be responsible for if you ignore the rules.
Learn About a Registered Agent
Some people who operate their small business from home don’t want their clients to know it. Since your legal address for your business is available on public record, you may want to consider having legal and business notices delivered to someplace other than your home. Many businesses get a P.O. Box for privacy purposes, but P.O. Boxes may not be acceptable addresses for registered agents. For an S-Corporation or LLC, you can have a separate address show up on behalf of your home business quite easily.
Now that you know the legal considerations for your business, you can move forward in planning your daily operations, shipping policies, digital presence, and other more particular logistics. Remember, when you open for business, it’s of utmost importance that an insurance company you can trust covers your inventory and assets. See if your home based business is eligible through RLI and seek protection today.
DISCLAIMER: This post provides general information related to legal considerations in starting up a home business. RLI is not a law firm. This information is not intended as a substitute for, and should not be relied upon as, legal advice. It is provided for general educational and informational purposes only. Although RLI strives to ensure that its content is accurate, it makes no guarantees. All legal inquiries should be directed to an attorney in your State or jurisdiction. RLI is not responsible for any errors or omissions in the content of this post or damages arising from the use of this information under any circumstances.
Sources:
- 10 Legal Steps Every Small Business Should Take – Small Business Legal Toolkit – https://www.score.org/resources/10-legal-steps-every-small-business-should-take-%E2%80%93-small-business-legal-toolkit
- Search Trademark Database – http://www.uspto.gov/trademarks-application-process/search-trademark-database
- Register with State Agencies – https://www.sba.gov/starting-business/choose-register-your-business/register-state-agencies
- Why Your Company Needs a Business Tax Identification Number – https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers
- Tips for Choosing Your Business Location – https://www.sba.gov/starting-business/choose-your-business-location-equipment/tips-choosing-your-business-location
- Why Do I Need A Registered Agent? – https://www.legalzoom.com/articles/why-do-i-need-a-registered-agent
