Running a home-based business is one of the most popular types of entrepreneurship at this time. More and more people are joining home-based business opportunities, or creating their own opportunities and using their home as the “head office” of their business.
If this is the structure you are looking into, it is important to ensure that you understand what this entails and how it affects you as a business owner. There are many legal considerations when you are putting together a home-based business. This includes running your business with a direct sales, multi-level marketing, or network marketing structure. Ensuring that your legal responsibilities are met and that you understand your requirements to operate a sound business are important. Here is what you should consider if you are starting a home-based business:
Pick the Right Structure
As we have just discussed, picking the right structure for your home-based business is important. The majority of home-based businesses are run as a sole proprietorship. However, you might consider running yours as a limited liability company to protect the safety of yourself and your family in the event of a tragic legal battle.
Get Your Business License
Your local government will more than likely require you to have a business license. These licenses do not regulate your business, but instead, keep your business legally registered. The best way to tell if you will need a business license is to answer this question: will you need to file taxes for the income you are making? If the answer is yes, you need a business license.
If Necessary, Obtain an Occupational License
Depending on what you are doing, you might need to acquire an occupational license. Certain careers are more restricted than others, and it is important that you are operating with the correct licenses. For example, if you are providing childcare for other people’s children, you will need an occupational license. To discover whether your occupation requires an occupational license or not, contact your local governing body. They will have the most accurate answers. It is important that you receive accurate information regarding this, as you do not want to be without a license and later find out one is required for your occupation.
Set Up Your Accounts with Sales Tax Agencies
Virtually all businesses that sell products and/or services are required to pay taxes on their sales. You want to make sure that you get the company bank account opening right away. Using these numbers will ensure that you receive the appropriate amount of tax from each sale. You will collect this tax and then pay it to the appropriate governing body. If you are required to tax the products or services you are offering, you may also need to acquire a “seller’s permit,” “resale license,” or “certificate of authority” depending on what you are offering and what your local legal requirements are.
Protect Your Business Name
It is essential that you have your business name protected. Unless your business name is literally your own name, you will need to check into it to see if it is legally protected yet or not. If not, you will want to purchase the rights to the name. This includes if you are using a name such as “[your name] and associates.” Even just adding additional words to your name may result in legal considerations, so marking your name as your trade name is important.
Consider Your Zoning Restrictions
Because you are running your business from your home, you need to consider the restrictions that may exist for you. Some homeowner associations, strata properties, and municipal zones are not eligible for home business ownership. Ensuring that you are legally entitled to run your business as per your zone, homeowner’s association, and strata rules is important. This ensures that you are not in violation of any legally governing documents that may deem your business illegally zoned or ineligible to operate in its current location. It is best to consider this before you start, rather than to start and later realize you are not legally allowed to!
Direct Sales Specifics
Lastly, if you are operating as a sales consultant for a direct sales, multi-level marketing, or network marketing company, it is essential that you read the fine print in the legal documents you agreed to upon joining your chosen company. Ensure that you remain within your legal obligations, rights, and restrictions as per the contract you have signed. This will protect you against potentially becoming liable for a mistake you make that could be outside of your agreement.