There are a lot of misconceptions around starting a home business. It's common for people to assume that because a business is operated from the home, it's easy to get started. However, if starting a home-based business was simple, everyone would do it. Sure, owning a home-based business has its perks — lower operating costs, a flexible schedule, and no dress code — but to get a home-based business up and running correctly, there are numerous decisions you need to make.
Before you do anything else, you need to determine how your business will be legally structured. Most home businesses are sole proprietorships, limited liability corporations (LLCs), or general partnerships. The type of business structure you choose depends on the type of business you're starting and how it's run.
Sole proprietorships and general partnerships operate in the same way. The only difference between them is the amount of owners. If you're the only business owner, your business would be a sole proprietorship, but if there are two people who own equal amounts of the business, it's considered a general partnership. With both options, your business and personal assets aren't considered separately. This means you are personally liable for your business. If your business gets sued or owes a debt it cannot pay, your personal assets are at risk. If you want to separate your personal and business assets, you'll need to establish an LLC. If you plan to establish an LLC, you should also consider hiring an accounting service, because all of your business finances need to be managed separately. You can't simply open a business bank account and use it to funnel money into your personal account. There are specific accounting rules that need to be followed, and you'll need to file both personal and business taxes.
Once you decide what type of business you want to start, you need to determine what — if any — business permits you need. In order to see what your business needs, you need to contact your state, city, and county. If you need multiple permits and a business license, you might want to hire a business lawyer to walk you through the startup process. If you need a vendor's license to collect sales tax, you should consider hiring an accounting service to handle your business finances. This way, you'll know that all of your quarterly tax payments and sales tax payments are made on time.
Starting a home business requires a lot of planning. The startup process isn't overly difficult, but handling all of the small details can get overwhelming. To ensure your business startup goes smoothly, you should consider talking to a business lawyer and an accounting service.