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Can I Operate a Business From Home?

  • Tips on following legal requirements for your home-based business
  • For those starting a business
  • Making sure you have the proper permits, licensing, insurance, and more

According to Small Business Administration (SBA), as many as 20 percent of new small businesses are operated out of the owner’s home. The acceleration of digital operations during the COVID-19 pandemic has also made it more feasible to manage a home-based business.

However, the popularity of home businesses has also led to increased scrutiny from regulators. It’s crucial that you keep up with all of the necessary regulations to legally run a business from your residence.

Zoning and community rules

Local zoning rules will establish what uses are permitted in certain neighborhoods. Check with local officials to see if your business is compliant with zoning. The rules may forbid certain commercial operations from being sited in residential neighborhoods.

You should also be in compliance with any community rules as well. Check with your landlord if you rent your home, or a homeowners association if you are part of one.

Licenses and permits

Consult with state and local officials to see if any licenses or permits are required. A general business license is typically needed at the municipality or county level.

Depending on the nature of your business, you may need other licenses or permits as well. The SBA offers a list of federally regulated activities that require a permit or license, such as agriculture, radio and television broadcasting, and transportation and logistics. State-level licenses or permits may also be necessary for businesses such as running a daycare or catering company.

If you’ll be putting up a sign at your home to promote your business, check

local ordinances for any restrictions. Most municipalities have rules on sign size, lighting, and other factors.

Insurance

A renter’s or homeowners insurance policy may not cover damages or injuries related to a home-based business. You may need to get a separate business liability policy for adequate protection.

Taxes

Keep track of expenses and purchases related to your home-based businesses for tax purposes. A home office deduction can apply if you regularly and exclusively use part of your home to conduct business.

Qualifying individuals can make numerous deductions on their taxes, including property taxes, utilities, insurance, and mortgage interest. However, claiming these deductions can also limit the deductions you can make elsewhere if you itemize your taxes.

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