Before You Start Your Home-Based Business: Do Some Due Diligence

One of the significant trends that has emerged as a result of the current economic recession is that home-based businesses are on the rise.

Not only is home-based business ownership often perceived as a rosy option for laid off or disaffected workers, but for many established small business owners, the move home is becoming more attractive.

With falling profits and continued overheads such as rent and utilities, more and more existing business owners are closing the doors on their brick-and-mortar places of business and setting up shop at home where they can realize monthly savings in the thousands of dollars.

But as small business experts observe, this is not a decision to be made lightly.

Home-Based Businesses – Step Back Before you Make the Leap

In her Small Business Blog, Rieva Lesonsky picked up on the growth of home-based businesses, but quickly cut to the chase.

In “Is It Time for Your Business to Come Home?“, Lesonsky, has valuable advice for would be home-based business owners. First, check whether you can actually run your current business out of your home, i.e. pay heed to local regulations governing home-based businesses such as zoning and permitting. And, second, consider this – are you sufficiently disciplined and content with your own company to tackle the temptations and potential loneliness that working from home can bring?

Only you can answer the second question, but it might be worth thinking back to times when you may have worked from home in the past. If you found yourself hitting the fridge or sneaking a quick peak at the TV rather than working your way through your to-do list, working from home may not be for you. And if you simply thrive on human interaction, then working from home definitely is not for you. The SBA has put together an ingenious little assessment tool designed to help you understand your readiness to start a small business.

As for Lesonsky’s first question, you’ll need to check out resources from your local government to determine what you need to do to legally start a home-based business. So many business owners think they can work “under the radar” at home without paying heed to the regulatory obligations. Others simply aren’t aware that they actually need a basic permit to own any type of home-based business.  It’s worth investigating since the fines can be hefty if you are found out.

Below is an overview of the zoning and permit requirements that you will need to understand and comply with while setting up your home-based business.

What Zoning Laws Govern Home-Based Businesses? 

While most zoning laws have adapted over the past 10 years to phase out restrictions on home-based businesses, current zoning codes still enforce a number of restrictions, including:

  • Physical Changes and Visibility – Zoning codes often prohibit exterior physical changes to the home for the purposes of conducting business. Outside business activities, storage, or displays are also prohibited, and signage or commercial vehicles may be restricted or prohibited.
  • Traffic – Most zoning codes restrict the numbers of visitors to a home-based business, and the number of employees working in the home. Some prohibit employees altogether. Business parking is also restricted.
  • External Effects  – Most zoning codes restrict or prohibit nuisance impacts (e.g., noise, odors, glare), and/or prohibit use, or storage, of hazardous materials.
  • Business Activities – Many zoning codes prohibit certain types of businesses in residential areas.

Zoning laws are determined by your city or county government. Find out which government agency enforces your zoning laws, and learn the specific laws that apply to operating home based businesses by using the state and local search engine on

What Permits Apply to Home-Based Businesses?

This is an area so often overlooked by home-based business owners. Whether you are a consultant, independent contractor, or run a more substantive business, such as an in-home day care, you will need one or more federal, state or local licenses or permits to operate.

Licenses can range from a basic operating license to very specific permits. The government has created a very handy tool – Permit Me – that lets business owners easily identify the licenses and permits required for their business.

Additional  Resources