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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. |
