Fifty million home-based
businesses will be in operation by 1997,according to Link Resource's
National Work-at Home Survey. All around the country, people who want more
control over their
lives are starting home businesses.
In New Orleans, Rick Hart's home based cajun Cargo
ships seafood nation wide. In Palatine,
Illinois, Stephaine Heavey works from home designing and selling original patterns for fabric
dolls.And in Dallas, Lisa McEly a published the Dallas Party & Event Planners Guidebook from
the entire first floor of her two-story home.
These three people are living the new American
dream of owning abusiness, but avoiding the high
overhead and start-up costs of acommercial location. If the idea of working from home
is appealing, but you don't know where to begin, here is a step-by-step guide.
STEP #1 DECIDE WHAT PART OF THE HOUSE TO USE
Select an area away from family activity. The perfect space is a separate
room (or perhaps the
garage), but any area will do, if it can hold all the business supplies and equipment, and
also provide enough work space for desks, tables, or counters.
STEP #2 DETERMINE HOW MUCH TIME YOU CAN SPEND ON THE BUSINESS
Many people start a home business on a part-time basis while raising
children or working outside
the home. Others start full-time when family and finances allow. However you begin, figure out how
may hours per week you can devote to the business. Make a weekly chart of your activities,
examine it, and determine where the business fits. Don't assume you have time and find out later
STEP #3 DECIDE ON THE TYPE OF BUSINESS
Make a list of things you like to do, your work and volunteer experience,
and items you own that
can be used in a business.Look over this line-up, and using ideas from it, list possible businesses to
start. Eliminate any business that isn't appealing or doesn't fill a need people have.
For ideas on different types of businesses, consult the end of this
article. Other ideas can be found
in the source material listed at the end of this article.
STEP #4 CHOOSE A LEGAL FORM
The three basic legal forms are sole proprietorship, partnership,and
corporation. The most
common is the sole proprietorship. As its name implies, a sole proprietorship is owned by
one individual. It is the oldest form of business, the easiest to start, and the least complicated to
dissolve. Here are some of the advantages of this business form:
1.You own all the profits
2.Your business is easy and cheap to organize. You don't
need any government approval,
although you may be required to carry a city, state or county license. Your only other
obligation is to notify the the State in order to obtain a sales tax license.You may file your statis with the IRS the next time you file your income tax. A bookkkeeper is recommended to get you
started in the right direction.
3.You're the boss
4.You enjoy certain tax savings.You must pay regular individual
taxes on your income,
property,and payroll, but these are not levied as special taxes, as with acorporation. You
will also have to pay sales tax which you have received from your customers.
5.Greater personal incentive and satisfaction. Since you
have your investment to lose if your
business is not successful, you should be more willing to put time, thought, and energy into
thebusiness. And when your business is successful, you enjoy maximum sense of
accomplishment since you know its success was dependent upon your decisions about your
management ability alone.
For more information about this and other forms of business, sendfor
the U.S. Small Business
Administration (SBA) Publication MP25. Selecting the Legal Structure for Your Business (50
cents).It outlines the advantages and disadvantages of each legal typeof structure. If after reading
it you are still uncertain what form of the business should take, consult an attorney.
STEP #5 DETERMINE WHERE THE MONEY WILL COME FROM
There are three ways to finance start-up costs: use your own money,
obtain a loan, or find
investors. If possible, it is better to start small, use your savings, and not worry about repaying a
debt. also keep in mind that since you are a home-based, chances of qualifying for a loan or
finding investors are slim until the success of your idea is proven.
STEP #6 GATHER INFORMATION
Spend a few weeks researching home-based businesses. A library or bookstore can provide
numerous books on business basics, and onthe specific type of business that interest you.
Homemade Moneyby Barbara Brabee (see sources) is an excellent book to startwith.
If you are considering a computer business, get in touch with the association
Cottagers, P.O. Box 1738, Davis, CA95617-1738. To keep informed of what is happening in
homebusiness world, contact National Home Business report, P.O. Box2137, Naperville, IL
60566, for subscription information; and Mothers Home Business Network, P.O. Box 423, East
Meadow, NY11554 (send SASE for free information).
STEP #7 CHECK ON ZONING RESTRICTIONS
Find out how your property is zoned, the call City Hall and askwhat
regulations apply to home
businesses in that zone. Also, if you rent or live in a condominium, check the lease or
homeowner's association rules to be certain a home business is allowed.
Generally, if you do not annoy your neighbors with excess noise, odors,
and traffic, you will not be
deterred from running a business at home. The neighbors may not even be aware of the business,
but it is necessary to know exactly what you can and can't do before you start. This is important
should any problems or questions arise later.
STEP #8 PICK A BUSINESS NAME AND REGISTER IT
If the business you choose is different form your name, file an assumed
(or fictitious) name
certificate with the county. You are notified if another business already has that name, so you
can select a new one.
Do this before investing in expensive stationery and brochures.It costs
only a few dollars to file,
and it protects the business name from being used by someone else in the county.
STEP #9 WRITE A BUSINESS PLAN
A good business plan clarifies your ideas and establishes a plan of
action. A good business plan
should include a description of what you are selling, your background and qualifications, who
the prospective customers are and where they can be found, what is needed to build the business,
how you plan to promote, and how much money is need for start-up costs.
SBA Publication #M925, The Business Plan for Home-Based Business($1) is helpful.
STEP #10 GET AN IDENTIFYING NUMBER
If you are the sole proprietor of the business and have no employees,
you may either use your
Social Security number or an Employee Identification Number (EIN) as the business number
on official forms. If you have employees, or the business is set up as a partnership or corporation,
you must obtain an EIN. To do this, complete IRS Form SS-4 (Application for
Employer Identification Number) and file it with the nearest IRS Center.
STEP #11 OBTAIN A SALES TAX PERMIT
If the product or service you sell is taxable, you need a state sales
tax permit. Call the local tax
agency, explain the type of business you have and what you sell, and ask if you need tocollect
sales tax. If you do, they will send you the necessaryinformation and forms to complete. You also
use this tax number when your purchase items for resale.
STEP #12 OBTAIN LICENSES & PERMITS
It's very important not to overlook any necessary license orpermit.
For example, some cities and
counties require a general business license, and most have special laws regarding the preparation
and sale of food.
Call City Hall to find out what is need for your particular business.
In addition, Chamber of
Commerce provide information oncity, county and state licenses and permits.
STEP #13 SELECT BUSINESS CARDS, STATIONERY, BROCHURES
Spend time on the color, design and paper for these items. Theymake
a definite impression-good
or bad- on the people who receivethem. If you are not certain what is most suitable and
effective,consult a graphics designer or a creative printer whose work you like.
STEP #14 OPEN A BUSINESS CHECKING ACCOUNT
Call several banks to find out what services they offer, and whatminimum
balance, if any, must be
maintained to avoid paying aservice charge. Also ask about credit card if you plan to offe rthis
convenience to your customers. Bank fees can be significant,so shop around for the best deal.
If your personal checking account is with a credit union, see ifit can
also provide a separate
business account. when you openyour account, you may need to show the assumed name
certificateand business license.
Finally, investigate obtaining a credit card in the business'sname.
If this is not possible, set aside a
personal credit cardto use for business expenses.
STEP #15 SET UP RECORD-KEEPING SYSTEMS
Put together a simple and effective bookkeeping system with an 81/2
x 11" three-ring binder,
columnar pad sheets and twelve pocket dividers from the office supply store. For each month,
setup columnar sheets for income and expenses. Use a pocket divider for each month's receipts,
bank statement, deposit tickets, and canceled checks.
In addition, an automobile log for business mileage, and filingsystem
for correspondence, invoices,
supplier catalogs, clientrecords, etc. are two other useful tools.
For more information on record-keeping, see IRS publication #583, Information
STEP #16 CHECK IRS REQUIREMENTS
If you comply with basic IRS guidelines, you can deduct a percentage
of normal household
expenses (mortgage, interest,taxes, insurance, utilities, repairs, etc.) as a business expense. see the
box accompanying this article and, for more detailed information, IRS publication #587, Business
Use of theHome.
Also become familiar with these IRS forms: Schedule SE(compensation
of Social Security
Self-Employment Tax) and Schedule 1040 ES (estimated Tax for Individuals). Depending
on circumstances, you may have to file them.
STEP #17 OUTFIT THE BUSINESS
Make a list of everything needed to start the business, butbefore you
buy anything, look around
the house for things you already own that are usable.
When you are ready to start purchasing, check the classified adsand
garage sales. Both are good,
inexpensive sources for office furniture, typewriters, computers, answering machines, etc. Buy only
what is absolutely necessary for start-up, and wait untilthe business is off the ground to get the
STEP #18 DECIDE ON TELEPHONE REQUIREMENTS
Call the telephone company to find out the cost of a businessphone in
your area. If you cannot
afford a separate businessline, investigate the telephone company's regulations on usingyour
personal phone in a business. It may be possible to do this if you follow certain guidelines. Keep a
record of long distancebusiness calls as they are a deductible expense. Finally,consider the
benefits of an answering machine to catch calls when you are out.
STEP #19 CHECK OUT THE POST OFFICE & UPS
Using a post office box as the business address down plays the fact
you are home-based. It also
prevents customers from droppingin at all hours.
While looking into box rental, ask for information on the variouspostal
rates, particularly bulk rate,
if you plan to do large or specialized mailings. If you mail many packages, check out United Parcel
Service (UPS), as it is less expensive than the Post Office.
STEP #20 PURCHASE THE NECESSARY INSURANCE
Check with your homeowners insurance agent about a rider for your existing
policy or the need for
a separate business policy. Alsomake sure you have adequate personal and product
liability coverage. Shop around, as each company has different rules regarding home businesses
To save money on medical insurance, join an association and participate
in their group plan. One
such body is The National association for the Self-Employed: they can be reached
STEP #21 ORGANIZE THE HOUSE & YOURSELF
To have more time for business, organize and simplify household routines.
Start by holding a
garage sale to get rid of unnecessary possessions. Next, have a family conference anddivide
household duties, making sure each person does his or herpart. The, set up a planning notebook
to keep track of appointments, things to do, calls to make, errands to run, shopping, etc. Finally,
set up a work schedule so you won't get sidetracked by TV, neighbor's visits, snacking, and
Creating and operating a home business is a wonderful and rewarding
challenge. The satisfaction is
not only in the money earned, but in doing what makes you happy.
SMALL BUSINESS ADMINISTRATION. Pamphlets mentioned in thisarticle
are available by
calling the nearest SBA office orordering from SBA, P.O. Box 15434, Ft. Worth, TX 76119.
HOMEWORKING MOTHERS. Mothers' Home Business Network, dept. 10-6,P.O.
East Meadow, NY 11554: sample available for $2 andSASE.
NATIONAL HOME BUSINESS REPORT, Barbara Brabec Productions, Dept10-6,
2137, Naperville, IL 60588; $18/year, quarterly.(Sample issue, $4.00)
ELECTRONIC COTTAGE HANDBOOK #2 MAKING $$ WITH YOUR HOME
COMPUTERby Lis Fleming. Fleming, Ltd., P.O. Box 1738, Davis, CA95617-1738; $7.00
HOMEMADE MONEY by Barbara Brabec, Barbara Brabec Productions,P.O.
Naperville, IL 60566; $16.95
HELP FOR YOUR GROWING HOMEBASED Brden. Live OakPublications,
6003 N. 51st Street, Suite 106,Boulder, CO 80301; $13.95
STAY HOME AND MIND YOUR OWN BUSINESS by Jo Frohbieter-Mueller.Betterway
Publications, Box 219, Crozet, VA 22932; $11.45
101 BEST BUSINESSES TO STAR by Sharon Kahn & The Philip LiefGroup
1983, $19.85). Many of the businesses profile are suitable for running at home.
AMERICAN HOME BUSINESS ASSOCIATION, 60 Arch St.,Greenwich, CT06830.
NATIONAL ALLIANCE OF HOME-BASED BUSINESS WOMEN, Dept. 10-6, P.O.Box
95, Norwood, NJ 07648; $30 annual membership.
NATIONAL ASSOCIATION FOR THE COTTAGE INDUSTRY, Dept. 10-6 P.O.Box
14850, Chicago, IL 60614; $45 membership.