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21 Steps
To Home Business Success
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 seafood nation
wide. In Palatine, Illinois, Stephaine Heavey works from home designing
and selling original patterns for fabric dolls on the internet. And in
Dallas, Lisa McElya published the Dallas Party & Event Planners
Guidebook from the entire first floor of her two-story home.
These three people are living the new American dream of owning a business
while avoiding the high overhead and start-up costs of a commercial
location. If the idea of working from home is appealing but you don't know
where to begin, here is a step-by-step guide.
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 while providing 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 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.
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.
STEP #6: GATHER INFORMATION. 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 is an excellent book to start with. You can also
scour the web for specific businesses that you find enticing.
STEP #7: CHECK ON ZONING RESTRICTIONS. Find out how your property is
zoned. Call City Hall and ask what regulations apply to home businesses in
that zone. Also, if you live in a condominium or private community, check
the lease or homeowner's association rules to be certain a home business
is allowed. Most are very strict since your neighbors moved into this type
of environment to be protected by such guidelines. They also want
assurances that their investments will continue to grow.
Generally, if you do not annoy your neighbors with excess noise, odors,
traffic, or parking limitations, 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 from 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 it, and how much
money is need for start-up costs.
STEP #10: GET AN IDENTIFYING NUMBER. If you are the sole proprietor of the
business and have no employees, 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.
STEP #11: OBTAIN A SALES TAX PERMIT. 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.
STEP #14: OPEN A BUSINESS CHECKING ACCOUNT. 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.
STEP #15: SET UP RECORD-KEEPING SYSTEMS. 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 ads and
garage sales. Both are good, inexpensive sources for office furniture,
typewriters, computers, answering machines, etc. Buy only what is
absolutely necessary for start-up and wait until the 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 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.
STEP #19: CHECK OUT THE POST OFFICE & UPS. 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.
STEP #20: PURCHASE THE NECESSARY INSURANCE. 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.
GOOD LUCK!
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Note:
We are not
responsible for the creation, accuracy or application of the material
presented herein (Reports and other related offers/products). The reader
is advised to seek legal counsel before starting any business or
implementing any ideas contained in these documents offered free of
charge.
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