Created by FindLaw's team of legal writers and editors | Last reviewed October 28, 2022
Regardless of the type of business or industry, it's important to know your state's rules and regulations when trying to run a business from your home. Here you'll find articles on everything from deciding if you are running afoul of local zoning laws, to an overview of the day-to-day operations of running a home business and more.
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Thanks to the internet, many types of home-based businesses are cropping up every day. Many people are finding success working from home. Some of the best home-based businesses right now include:
- Freelance writers, editors, and bloggers
- Freelance designers
- Freelance computer coders
- Web designers, Web developers, and app developers
- Online tutors
- Online sellers with an Etsy shop or resellers on eBay
- Data entry, medical billing, medical coding
- Cottage food preparer and seller
- Travel planners
- Marketing and social media
- Customer service and phone work
- Accountants and tax preparers
- Massage therapists, and health, wellness, and nutrition consultants
- Event planners
- Home daycare providers
- And more
Not every home-based business is a winner. In fact, some take a lot of work for very little pay, and some are simply scams. Remember, success depends on a clear understanding of what it means to operate a business from one's home.
Am I Allowed to Run a Business From Home?
The answer to that question is, “It depends." It depends on the kind of business you want to operate and where you live. It also depends on what kind of business license you need and what kind of insurance is required. Finally, it depends on whether your lease, your homeowners' association, building rules, and local zoning codes permit the activity in question.
Get a Business License
Depending on the type of business you want to operate, you may be required to get an occupational license as well as a general business license. For example, if you want to run a home child care center, you may need a professional license, a health department inspection, and a fire department inspection of your home. It would be the same if you were offering in-home health care for seniors.
If you will be selling things to customers who come to your home, you may need a seller's permit. In this context, you may also need to obtain a local and/or state tax registration certificate.
Local government entities like cities and counties often charge a business licensing fee. Some portion of those fees goes to regulating businesses within your community. In order to get a business license, you need to know what kind of business structure you want to form – a sole proprietorship, a partnership, a limited liability company, or a corporation. You also need to know what kind of business you want to do.
To get a business license, simply go to your city or county's website for information and the form you need to file. You may need a state-issued license as well. Often you can apply and pay for your license online.
Home-Based Business Legal Requirements: Register Your Business
Even if you don't need a license to operate, you will likely need to register your business with your Secretary of State's office. You will need a business name and some basic information about your business.
Self-Employed Workers and Taxes
You may need a business Tax ID number. If you are a sole proprietor, you may be able to use just your Social Security number. If you will have employees, you need an employer identification number.
Contact the IRS to complete any necessary paperwork to register your business. You will also need to set up an account to pay income tax withholding, sales tax, and to file your business tax return.
Insure Your Home-Based Business
Having insurance is always a good idea. You may already have homeowner's insurance but be sure to read your policy or to talk with your insurance agent. Usually, business assets are not covered by a home policy, even if it's a home computer that you also use for business purposes. If clients/customers visit your home, your regular liability insurance may not extend to business guests.
It's better to be protected, particularly if you store large amounts of sensitive data in your home office or have clients come to your residence.
Before You Open a Home-Based Business, Check Your Lease and Building Rules
If you rent a home or apartment, your lease will set out restrictions for the use of the property. Your lease may restrict you from operating a business. If your lease doesn't mention it, that doesn't necessarily mean you can open up shop. If your business will disturb the peace of your neighbors with frequent clients, you may find yourself at odds with your landlord.
If your business will increase traffic or cause parking problems in your community, such as running a high-volume vacation rental out of your home, it may violate homeowners' association restrictions. Find out exactly what is stated in the Covenants, Codes, and Restrictions (CCRs).
Speak to your landlord or homeowners' association before beginning a business venture out of your home.
Most home-based businesses do not engage in activities that would trigger a regulatory issue, but if your business activities involve the use of dangerous chemicals, it might. Resources at the Small Business Administration (SBA) may help you find out who you need to talk to before your new business opens its doors.
Home Businesses and Zoning Laws
Local zoning ordinances restrict the ways that properties can be used within an area. Generally speaking, zoning regulations are rarely an issue for home-based businesses because they tend to have few visitors and no outside employees.
What may trigger zoning concerns is noise, excessive traffic, and/or use of the neighborhood's parking spaces. You may be able to avoid problems by negotiating with neighbors and compromising on reasonable hours of operation; or, you may need to request a zoning variance.
Signage can also be a problem for home-based businesses in an apartment, condo, or homeowners association. Do you need a sign for your home daycare center? Can you post it? Where? What size and materials are allowed?
Home Business Rules and Regulations
Regardless of the type of business or industry, it's important to know your state's rules and regulations for operating a business. Review information at FindLaw's Starting a Business section for articles and tips on many aspects of day-to-day small business operations for entrepreneurs.
Hire a Business Attorney
If you are a first-time business owner or just need a little extra assistance understanding the law, consider hiring a business lawyer. Business attorneys can help with legal problems before they become a critical problem. For example, explaining zoning codes or licensing requirements.
Contacting a small business lawyer can help you anticipate and prevent serious legal problems.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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