How Do I Set Up a Home Business?


This is a question on many people’s minds when they think about opening a business. Business set up procedures are virtually the same for all small businesses, whether they are home-based or not.

Karen working at desk at homeEssentially, the state and federal governments want to make sure that you are operating your business legally, and paying your taxes of course.

The legal aspects of setting up a new business are important, but they are not difficult or time-consuming. If in question, you can always contact the IRS or your local city hall. They will answer your questions for free, and they can be very helpful.

Here is what you should do:

Setting Up a Small Business:

  1. Find Out Zoning Requirements:
    You may need to check zoning requirements for your business to make sure you can operate in your neighborhood (for example, if you plan to run a group home, day care, commercial cooking business out of your home).
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  3. Decide on a Business Structure:
    Will you run your business as a Sole Proprietor? Partnership? LLC? Corporation? Many home business owners start their businesses as sole proprietors because they are easy and cheap. On your tax returns, you simply report your business income on a Schedule C form.Forming a corporation is more complicated and costly, but it provides legal protection for your personal assets. Find out which business structure is right for you.
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  5. Register Your Business Name:
    If you are doing business under a different name than your own, you want to register your DBA (“doing business as”, or commonly known as a fictitious business name) with your city or county clerk.
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  7. Get a Business License:
    You get a business license from your local government office (city hall). Licensing requirements vary by city and state and by business type. You can visit your local office in person or some download licensing applications from the city’s website. (If you will be purchasing goods or materials for resale, contact your state about obtaining a resale license, which allows you to not pay tax on those items.)
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  9. Get Your Tax ID Number:
    You get a Federal Tax ID Number, or Employer ID Number (EIN), from the IRS. You can apply through their website, by phone, fax or mail. Apply for a Federal Tax ID Number. For fastest service, apply online. It can take up to five weeks to get your EIN if you apply by mail.The EIN you receive is your permanent number and can be used for business tasks such as opening a business bank account, applying for a business license or filing a tax return. If you don’t know if you need a Federal Tax ID Number for your business, answer these questions.
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  11. Taxes:
    Register with the state for collection of sales tax, if applicable and register with the city/county for local taxes. You can get more information paying taxes at the IRS website.

Setting up Your Business, Step-by-Step

There is a great guide called “Working for Yourself: Law & Taxes for Independent Contractors, Freelancers and Consultants”. It has all of the important tax and legal information that new businesses need and gives step-by-step guidance on setting up your own business.

When you start your own company, you want to be aware of any tax codes and legal issues that may affect your business.

Many businesses hire accountants and attorneys, and it is a good idea to delegate these jobs to professionals. That said, it does not hurt to have a basic understanding of these business aspects yourself – since they affect your business.

Yes, you can hire an accountant and an attorney to handle these matters, but it’s a good idea to know that basics. Understanding the basics can also save you some money.

For many years, Nolo (one of the web’s first legal websites) has developed high-quality books, software, legal forms and an online lawyer directory that has helped millions of people find answers to their everyday legal and business questions – without the high cost of attorney’s fees.

Nolo put together Working for Yourself so that freelancers, independent contractors and consultants could draft solid legal documents without having to hire a legal professional. This guide is a handy resource to have when starting a business, but also to have on hand thereafter.

As a small business owner, you need to know about laws and taxes that you wouldn’t necessarily need to be aware of. This guide gives you all of the information you need. Author Stephen Fishman shows you:

  • How to meet requirements for a business start-up
  • Selecting a structure for your business
  • How to organize a home or outside office
  • Instructions on getting permits and licenses
  • Guidelines on pricing your products and services
  • All about IRS rules
  • Establishing sound business relationships
  • How to draft good agreements and keep accurate records
  • Secrets to getting paid in full and on time and lots more

List of Forms

  • Asset Log
  • Expense Journal
  • Income Journal
  • Invoice
  • General Independent Contractor Agreement
  • Contract Amendment
  • Nondisclosure Agreement

Get Started Here