Over one hundred million home-based businesses will be in operation by 2006, 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 seafoodnation wide. In Palatine, Illinois, Stephaine Heavey works fromhome designing and selling original patterns for fabric dolls.And in Dallas, Lisa McElya published the Dallas Party & EventPlanners Guidebook from the entire first floor of her two-storyhome.
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 isappealing, but you don't know where to begin, here is astep-by-step guide.
STEP #1 DECIDE WHAT PART OF THE HOUSE TO USE
Select an area away from family activity. The perfect space is aseparate room (or perhaps the garage), but any area will do, ifit can hold all the business supplies and equipment, and alsoprovide 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 whileraising children or working outside the home. Others startfull-time when family and finances allow. However you begin,figure out how may hours per week you can devote to the businessMake a weekly chart of your activities, examine it, and determinewhere the business fits. Don't assume you have time and find outlater you don't.
STEP #3 DECIDE ON THE TYPE OF BUSINESS
Make a list of things you like to do, your work and volunteerexperience, and items you own that can be used in a business.Look over this line-up, and using ideas from it, list possiblebusinesses to start. Eliminate any business that isn't appealingor doesn't fill a need people have.
For ideas on different types of businesses, consult the end ofthis article. Other ideas can be found in the source materiallisted 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. Asits name implies, a sole proprietorship is owned by oneindividual. It is the oldest form of business, the easiest tostart, and the least complicated to dissolve. Here are some ofthe advantages of this business form:
1. You own all the profits
2. Your business is easy and cheap to organize. You don't needany government approval, although you may be required to carry acity, state or county license. Your only other obligation is tonotify the Internal revenue Service (IRS) for the purposes ofsales 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 acorporation. You will also have to pay sales tax which you havereceived from your customers.
5. Greater personal incentive and satisfaction. Since you haveyour investment to lose if your business is not successful, youshould be more willing to put time, thought, and energy into thebusiness. And when your business is successful, you enjoy maximumsense of accomplishment since you know its success was dependentupon 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) PublicationMP25. 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 whatform 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 ownmoney, obtain a loan, or find investors. If possible, it isbetter to start small, use your savings, and not worry aboutrepaying a debt. also keep in mind that since you are ahome-based, chances of qualifying for a loan or finding investorsare slim until the success of your idea is proven.
STEP #6 GATHER INFORMATIONSpend a few weeks researching home-based businesses. A library orbookstore 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 theassociation of Electronics; 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; andMothers 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, ifyou rent or live in a condominium, check the lease or homeowner'sassociation 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 abusiness at home. The neighbors may not even be aware of thebusiness, but it is necessary to know exactly what you can andcan't do before you start. This is important should any problemsor questions arise later.
STEP #8 PICK A BUSINESS NAME AND REGISTER IT
If the business you choose is different form your name, file anassumed (or fictitious) name certificate with the county. You arenotified if another business already has that name, so you canselect a new one.
Do this before investing in expensive stationery and brochures.It costs only a few dollars to file, and it protects the businessname 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 planof action. A good business plan should include a description ofwhat you are selling, your background and qualifications, who theprospective customers are and where they can be found, what isneeded to build the business, how you plan to promote, and howmuch 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 noemployees, you may either use your Social Security number or anEmployee Identification Number (EIN) as the business number onofficial forms. If you have employees, or the business is set upas a partnership or corporation, you must obtain an EIN. To dothis, complete IRS Form SS-4 (Application for EmployerIdentification 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 statesales tax permit. Call the local tax agency, explain the type ofbusiness 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 numberwhen 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 generalbusiness license, and most have special laws regarding thepreparation and sale of food.
Call City Hall to find out what is need for your particularbusiness. 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 youlike.
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 offerthis 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 twelvepocket dividers from the office supply store. For each month, setup columnar sheets for income and expenses. Use a pocket dividerfor each month's receipts, bank statement, deposit tickets, andcanceled 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 for Business taxpayers.
STEP #16 CHECK IRS REQUIREMENTS
If you comply with basic IRS guidelines, you can deduct apercentage of normal household expenses (mortgage, interest,taxes, insurance, utilities, repairs, etc.) as a businessexpense. see the box accompanying this article and, for moredetailed information, IRS publication #587, Business Use of theHome.
Also become familiar with these IRS forms: Schedule SE(compensation of Social Security Self-Employment Tax) andSchedule 1040 ES (estimated Tax for Individuals). Depending oncircumstances, 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 youalready own that are usable.
When you are ready to start purchasing, check the classified adsand garage sales. Both are good, inexpensive sources for officefurniture, typewriters, computers, answering machines, etc. Butonly what is absolutely necessary for start-up, and wait untilthe 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 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 thisif 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 whenyou are out.
STEP #19 CHECK OUT THE POST OFFICE & UPS
Using a post office box as the business address down plays thefact 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 orspecialized mailings. If you mail many packages, check out UnitedParcel Service (UPS), as it is less expensive than the PostOffice.
STEP #20 PURCHASE THE NECESSARY INSURANCE
Check with your homeowners insurance agent about a rider for yourexisting policy or the need for a separate business policy. Alsomake sure you have adequate personal and product liabilitycoverage. Shop around, as each company has different rulesregarding home businesses
To save money on medical insurance, join an association andparticipate in their group plan. One such body is The Nationalassociation for the Self-Employed: they can be reached at800-527-5504.
STEP #21 ORGANIZE THE HOUSE & YOURSELF
To have more time for business, organize and simplify householdroutines. Start by holding a garage sale to get rid ofunnecessary 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 ofappointments, things to do, calls to make, errands to run,shopping, etc. Finally, set up a work schedule so you won't getsidetracked by TV, neighbor's visits, snacking, and telephonecalls.
Creating and operating a home business is a wonderful andrewarding challenge. The satisfaction is not only in the moneyearned, but in doing what makes you happy.
SOURCES
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.
NEWSLETTERS
HOMEWORKING MOTHERS. Mothers' Home Business Network, dept. 10-6,P.O. Box 423. East Meadow, NY 11554: sample available for $2 andSASE.
NATIONAL HOME BUSINESS REPORT, Barbara Brabec Productions, Dept10-6, P.O. Box 2137, Naperville, IL 60588; $18/year, quarterly.(Sample issue, $4.00)
BOOKS, REPORTS
ELECTRONIC COTTAGE HANDBOOK #2 MAKING $$ WITH YOUR HOME COMPUTERby Lis Fleming. Fleming, Ltd., P.O. Box 1738, Davis, CA95617-1738; $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. LibertyPublishing 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. MorganPublishing Co.,Dept. 10-6, P.O. Box 1375, Huntington, NY 11743;$15. (Includes free report: " The Legalities and Tax AdvantagesIn a Home Business.")
THE WORK-AT-HOME SOURCEBOOK by Lynie Arden. Live OakPublications, 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 LiefGroup (Doubleday, 1983, $19.85). Many of the businesses profiledare suitable for running at home.
ASSOCIATIONS
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.
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