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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 you don't.
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 Internal revenue Service (IRS) for
the purposes of sales tax.
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 a corporation. 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 the business. 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, send for 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
type of 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 on the specific
type of business that interest you. Homemade Money by Barbara Brabee (see
sources) is an excellent book to start with.
If you are considering a
computer business, get in touch with the association of Electronics; Cottagers,
P.O. Box 1738, Davis, CA 95617-1738. To keep informed of what is happening in
home business world, contact National Home Business report, P.O. Box 2137,
Naperville, IL 60566, for subscription information; and Mothers Home Business
Network, P.O. Box 423, East Meadow, NY 11554 (send SASE for free information).
STEP #7 CHECK ON ZONING
RESTRICTIONS
Find out how your
property is zoned, the call City Hall and ask what 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 to collect sales tax. If you do, they will send you the necessary
information 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 or permit. 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 on city, county and state licenses and permits.
STEP #13 SELECT BUSINESS
CARDS, STATIONERY, BROCHURES
Spend time on the color,
design and paper for these items. They make a definite impression-good or bad-
on the people who receive them. 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 what minimum balance, if any, must be
maintained to avoid paying a service charge. Also ask about credit card if you
plan to offer this 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 if it can also provide a separate business
account. when you open your account, you may need to show the assumed name
certificate and business license.
Finally, investigate
obtaining a credit card in the business's name. If this is not possible, set
aside a personal credit card to use for business expenses.
STEP #15 SET UP
RECORD-KEEPING SYSTEMS
Put together a simple and
effective bookkeeping system with an 8 1/2 x 11" three-ring binder, columnar pad
sheets and twelve pocket dividers from the office supply store. For each month,
set up 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 filing system for correspondence,
invoices, supplier catalogs, client records, etc. are two other useful tools.
For more information on
record-keeping, see IRS publication #583, Information for Business taxpayers.
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 the Home.
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, but before 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 ads and garage sales. Both are good,
inexpensive sources for office furniture, typewriters, computers, answering
machines, etc. But only what is absolutely necessary for start-up, and wait
until the business is off the ground to get the extras.
STEP #18 DECIDE ON
TELEPHONE REQUIREMENTS
Call the telephone
company to find out the cost of a business phone in your area. If you cannot
afford a separate business line, investigate the telephone company's regulations
on using your personal phone in a business. It may be possible to do this if you
follow certain guidelines. Keep a record of long distance business 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 dropping in at all hours.
While looking into box
rental, ask for information on the various postal 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. Also make 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 at
800-527-5504.
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 and
divide household duties, making sure each person does his or her part. 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 telephone calls.
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.
SOURCES
SMALL BUSINESS
ADMINISTRATION. Pamphlets mentioned in this article are available by calling the
nearest SBA office or ordering from SBA, P.O. Box 15434, Ft. Worth, TX 76119.
NEWSLETTERS
HOMEWORKING MOTHERS.
Mothers' Home Business Network, dept. 10-6, P.O. Box 423. East Meadow, NY 11554:
sample available for $2 and SASE.
NATIONAL HOME BUSINESS
REPORT, Barbara Brabec Productions, Dept 10-6, P.O. Box 2137, Naperville, IL
60588; $18/year, quarterly. (Sample issue, $4.00)
BOOKS, REPORTS
ELECTRONIC COTTAGE
HANDBOOK #2 MAKING $$ WITH YOUR HOME COMPUTER by Lis Fleming. Fleming, Ltd.,
P.O. Box 1738, Davis, CA 95617-1738; $7.00 ppd.
HOMEMADE MONEY by Barbara
Brabec, Barbara Brabec Productions, P.O. Box 2137, Naperville, IL 60566; $16.95
HELP FOR YOUR GROWING
HOMEBASED BUSINESS by Babara Brabec. Barbara Brabec Productions, P.O. Box 2137,
Naperville, IL 60566; $13.45.
THE #1 HOME BUSINESS BOOK
by George and Sandra Delany. Liberty Publishing Publishing Co. Inc., Dept 10-6,
50 Scott Adam Rd., Cockeysville, MD 21030; $4.95.
THE COMPLETE WORK-AT-HOME
DIRECTORY AND IDEA BOOK. E.A. Morgan Publishing Co.,Dept. 10-6, P.O. Box 1375,
Huntington, NY 11743; $15. (Includes free report: " The Legalities and Tax
Advantages In a Home Business.")
THE WORK-AT-HOME
SOURCEBOOK by Lynie Arden. Live Oak Publications, Dept. 10-6, 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 Lief Group (Doubleday, 1983, $19.85). Many of
the businesses profiled are suitable for running at home.
ASSOCIATIONS
AMERICAN HOME BUSINESS
ASSOCIATION, 60 Arch St.,Greenwich, CT 06830.
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. |
