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 BUSINESSMany 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.
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.
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.
STEP #10 GET AN IDENTIFYING NUMBER
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.
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.
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.
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 adsand garage sales. Both are good, inexpensive sources for officefurniture, 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.
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.
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.
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.
