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Starting A Home Business

Following this simple roadmap will guide you to starting a home business that will best meet the needs of you and your family.

Begin with the end in mind

First, you need to determine what you want to get out of your business.
  • Is the business to build up a retirement income?
  • Are you looking for a little extra income?
  • Do you want to fire your boss?
  • Is the goal to build your dream life?
  • Do you want to have more freedom and security?
  • Looking for a Plan B

Each will be very different. The person looking for a little extra income will probably be looking for work that can be done as an independent contractor. The person who is after the ultimate dream life will need a business that provides a high income and the time freedom to live the dream. Starting a home business that will allow you to 'fire your boss' means having one that you can run initially part-time and eventually turn into a full-time position.

Are you looking for a business that you can sell in a few years or that you can turn over to your children? Do you want to be able to move in the future and have the business travel with you?

Take Inventory

Starting a Home Business What are your passions? What do you feel are your strong and weak points? How much money do you have to work with? How much time do you have to devote to the business? Are other family members going to be involved?

Choose Your Business

Knowing what you want to accomplish when starting a home business will guide you in your selection of the business that is right for you.

Line Up Your Advisors

Look for people that are experienced in starting a home business, they can tell you the in and out's of it. Family and friends that do not have a business will most likely try to discourage you since they have been afraid to or unable to create their own. Those that own traditional non-home based businesses will not be as useful those who do have the home business.

A lawyer should review any contracts before you sign them. It is cheaper to use an attorney to keep you out of trouble than to get you out of trouble.

A tax accountant can guide you to best ways to avoid paying any more taxes than you are legally required to do.

Involve your home and family in the process. The business will have a direct effect on all. The success of your business depends upon knowing how to work at home.

Choose the Form of Business

There are several ways in which to choose to operate when your starting a home business.

The simplest way is to operate as an independent contractor. This requires no setup; you operate under your own name and use your social security number for your tax id.

If one chooses to operate under an assumed name, the filing can be done at the County Clerk's Office.  If one person owns the business, then it is Sole Proprietorship.  If there is more than one owner, then it becomes a Partnership.   The cost of registering the business this way is very low.  The downside is that it offers no protection of your personal assets in the event of debt collections against the business or from lawsuits filed against the business.

To protect your personal assets, the business would have to be registered at the state level.  The easiest state filing is as a Limited Liability Company (LLC).  Filing as an individual with no employees one can do so without having to file for a Federal Tax ID number, the individual Social Security Number can be used.  An LLC can also be used in place of a partnership.

The final form is the Corporation.  The corporation provides the personal asset protection and allows you to raise money for your business by selling stocks in it.  Frequently referenced are the S Corp and the C Corp.  The difference is in the way that the corporation is taxed.  With an S Corp, the taxes pass through and taxes are paid on the individual level.  C Corp you will hear about "double taxation" because the corporation pays taxes and then the individual pays taxes on income and dividends.  

The best choice of for the type of business is very dependent upon individual circumstances.  It is recommended that you consult with an attorney and tax accountant first to choice the best one for you.

Local Ordinances

Before starting your business you will need to check out the zoning laws for your community.  You want to make sure you can legally run your business from your home.  You will also need to check to see if your desired business requires any special license.  If selling or making food is part of your business you will also need to check with the health department.

Financial Considerations

Financing for a home based business will most likely have to come from personal sources. Small business loans will be very difficult to get now with the current downturn in the economy. It has made credit very difficult to obtain.

Best sources will be savings, credit cards, family and friends.

Create Your Plan of Action

The plan of action becomes your business plan.  When starting a home business, this will be your roadmap to keep you on track.   The more clearly that you can lay out your action steps and assign priorities to them, the more effectively you can make your time count and achieve business success quicker.

Do It!

Do not wait until everything is perfect, it never will be when starting a home business. No matter how much you plan you will have surprises, and setbacks. Welcome them, for they will make you stronger, and often open up new opportunities for you. Make the business fun. Keep in mind what you stand to gain, and that will get you through the tough times. But success only comes to those who DO IT!

"A home based business gives you all the benefits of a non-home based business without the burden of the high overhead."
~ Larry Louzon

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