STARTING A HOME-BASED BUSINESS

STARTING A HOME-BASED BUSINESS

SCORE San Diego

Starting a home based business in California is not difficult, but it does take research and a business plan. The high cost of renting and maintaining space makes beginning a home business very attractive. The savings is often more profitable due to less start-up costs, cost controls, etc.

WHAT KINDS OF BUSINESSES CAN BE RUN FROM HOME? Any business that does not require you to meet clients face to face in an office. The types of businesses include: Internet websites, bookkeeping, virtual office and administrative duties, writers, publishers, consultants, speakers, researchers, specialty mail-order, bed and breakfast establishments, small construction workers, landscapers, and others who do not disturb the neighbors with noise, deliveries, retail customers, etc.

BEFORE spending money and obtaining permits, it is suggested that you have a BUSINESS PLAN.

o The most important aspect of any venture is a well-researched, documented and executed plan.

o During the preparation of the plan you will research your product/service, consider its market value, targets and demographics.

o Market Analysis & Strategy ? What is your market and who are your customers? What is your competitive advantage?

o Check competition and similar business websites including around the country for ideas. o Offer to work for or assist others in the same or related business to get experience and

knowledge as to how they do business. Also, confirm that you are sure it is what you really want to do. o SCORE San Diego offers numerous business workshops, including Business Planning. Click Entrepreneur Series . o Look at our Library of documents and Click here to view SCORE San Diego Documents. Here you will find Business Planning Aids. Also check our links and Click here to view resource links. .

FIRST THINGS FIRST

Make sure your company name and selected domain name(s) are available (purchase ASAP). See more information below.

IMPORTANT CONSIDERATIONS

Operating a home business can give you a sense of independence and personal satisfaction. However, to be successful, you will need to make a total commitment to the business and its needs. Being your own boss does not give you total independence. Meeting the various business needs (e.g., customers, suppliers, employees, etc.) will limit your independence. Operating a home-based business usually requires a greater commitment of time, energy and money than most jobs. It also requires a great deal of sacrifice, making it difficult to balance business and family needs.

There are many factors to consider before starting a business in your home.

Do you have the personality and business skills to run a business?

o Does it make sense to operate the business out of your home? o How will this business affect the family environment? o Is their sufficient demand for your product or service? o What price should be charged for your product or service? o These and other important questions can be answered by writing a sound business plan,

follow it and revise it to meet economic, etc. changes.

Advantages:

o Can start as a part-time business. o More flexible lifestyle and more integrated with the family. o Lower start-up and operating costs. o Cost-savings on child/adult care. o No commuting. o Flexible work hours. o Satisfaction of being own boss. o Increased tax benefits and write-offs. o Outlet for creative/unique talents. o Employment of family members by the business.

Disadvantages:

o Space may be cramped, limiting growth potential and family use. o Personal and family lifestyle patterns may be disturbed. o Business and family privacy may be disrupted. o Long work hours and time away from family. o Lack of fringe benefits. o Lack of informal social contacts or opportunities to network. o Stress due to inability to balance family and business needs. o Family members and friends may demand more of you when you're home all day. o Business activities may cause problems with neighbors. o Discipline is required to establish steady, homework patterns.

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Balancing family, friends, neighbors and business needs:

Having the support of your family and friends will help achieve the balance you need for a happy life and successful business. It is essential that each member of the family be given the chance to share their thoughts and feelings about starting a business in their home. Here are some suggestions for helping you strike such a balance:

o Involve family members and friends, where it makes sense, in developing the business plan, and communicate intentions to all family members.

o Maintain a clear distinction between your business life and personal life. o Share home responsibilities with other members of the family. o Family members need to be kept informed of plans likely to affect the family. o Manage your time effectively by developing good time management skills. o Allow time for family vacations, and limit business hours to specific times of the day and

week. o Start your business when your children are older or consider operating part-time when

they are young.

RESEARCH & TO DO'S: Check your City Business License and zoning departments for their rules, such as No Signs at your home, no cooking in your kitchen for catering, etc. Child care requires certain rules also. Check your city and nearby cities to find out how many other businesses are doing what you want to do. Search for them on the Internet. Check your homeowner association rules. Review and comply with all regulations and restrictions for home businesses. Certain home businesses require licensing, permits and registration in California. In addition, counties and cities also have local regulations and licensing that a home business must follow. Running a home business without the proper permits and licensing can result in fines. Cal Gold is the California informational site for business permit information, while the California Dept of Consumer Affairs at offers information on any professional licensing needed as a home business owner.

o GET & CALCULATE COSTS: find out what office equipment, office supplies, telephones, fax, web sites, domain names, etc. Determine what all your overhead costs are, how much you should charge to make a profit, what it costs to have employees, or independent contractors to assist you if needed. Try to keep the work load to what you can do on your own. Don't price yourself out of the market.

o START-UP CAPITAL: Following the preparation of your financial plan, you will know what funds will be needed to start-up and continue the business until it is profitable. If you don't have the necessary capital, click on Start-Up and Existing Businesses for financing information. If you are considering investors, click Venture Capital Funding .

o ZONING LAWS : :

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o BUSINESS LICENSES: If required, purchase a City Business License and obtain a license list to see what other kinds of businesses are in your local area including your competition To search for cities requiring licenses go to:

o FICTITIOUS NAME (DBA): The County Recorder's office is responsible for fictitious names (name other than your own) to do business. Choose one that gives you flexibility, but tells what you do. To search go to: A corporation does not have to file for a fictitious name (DBA) unless it is using names to do business other than the corporation's name.

o DOMAIN NAME: Search on line using one of the web-hosting sites, IE. , and . This is a good method to see if a fictitious name is also available. Your domain name should be short as possible, if not it is suggested that you also purchase an acronym to make your site quicker to access. For example: could also be .

o TRADEMARK, COPYWRITE, PATENT SEARCH & REGISTRATION: Click Intellectual Property - Overview . You may wish to trademark your name and logo, click United States Patent and Trademark Office . Trademark rights may be used to prevent others from using a confusingly similar mark, but it will not prevent others from selling the same goods and services.

o TAX ID NUMBER (EIN): It is suggested that an EIN be obtained even though it is needed only if you hire employees or incorporate. By having the EIN you will avoid sharing your social security number when creating 1099's and other documents to clients and resources.

o BANK ACCOUNT: Open a separate business checking account prior to receiving payment for your goods and/or services. This is to avoid co-mingling. If you are not using your name as the business name, the bank will require your fictitious name certificate. You may pay for start-up expenses from your personal bank account to be repaid from the business for up to two years, providing you keep receipts and list what they are for.

o BUSINESS INSURANCE: It is recommended that if you are in business, you should have business insurance. It is critical to protecting personal assets especially when the business operates out of the home. Many of your customers may require it to do business with them. Find a reputable agent through referrals, including your auto & homeowner's insurance agent.

o BUSINESS STRUCTURE: Click Business Structures ? Comparison of Forms to get information on why and how to select a business structure. Selection of a certain structure is based upon if your personal assets will be exposed to legal action. The first line of defense is business insurance. If you have a partner, be sure to get a partnership agreement and incorporate to protect you both. Talk with an attorney.

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o PARTNERSHIP: Get a partnership agreement. Surf the Internet for forms. The document should be approved by an attorney. Partnerships are sometimes very difficult to operate under. It is suggested that all elements of the operation, duties, salaries, etc. are considered.

o RETAIL SALES TAX NUMBER: A sales and use tax number may be obtained from the State Board of Equalization (BOE) if you are going to be selling a product at retail and collecting sales tax that was not paid to your vendor. Also, wholesale resources will require your resale number. Go to

o BUSINESS FORMS, AGREEMENTS & CONTRACTS: Get an attorney or legal assistant to review all written agreements/contracts to be sure you are protected, as well as your clients. Be sure to include a disclaimer on your written contracts.

o EMPLOYEES: You could hire employees through a Temporary Agency and they pay all the employment taxes. If you have your own employees, you must pay taxes collected and report to IRS & FTB and file returns quarterly. It is suggested that an outside payroll service be used, as it has been proven to be more cost efficient and error free.

o YOU ARE AN EMPLOYEE: Remember, you are an employee besides the owner of the business. Consider what your salary would be and include that in your plan. You should make a profit after the consideration of your salary.

o EMPLOYMENT ELIGIBILITY VARIFICATION ? FORM I-9: The purpose of this form is to document that each new employee (both citizen and non-citizen) is authorized to work in the United States. Click here files/form/i-9.pdf

o WORKERS' COMPENSATION INSURANCE: California employers are required by law to have workers' compensation insurance, even if they have only one employee. Go to for more information.

o EMPLOYEE vs. INDEPENDENT CONTRACTOR: Click here to obtain the descriptions ? Employee vs. Independent Contractor . It is very import to understand the difference.

o FULFILLMENT SERVICES: Consider using outside warehousing and shipping companies. Surf the Internet and talk to other businesses for qualified referrals.

o SYSTEMITIZE AND ORGANIZE: Prepare the business as if someone needed to take it over and run it for you. Have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business.

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o BOOKKEEPING AND RECORD KEEPING: Having a set accounting procedure will help in getting files organized for taxes, track expenses, cash flow, sales records and determine profitability. Get bookkeeping help if you do not have training and at least to set up your Chart of Accounts and accounting system. There are numerous accounting programs available including QuickBooks, Peachtree and Account Edge. SCORE presents QuickBooks Workshops at

o DOCUMENT RETENTION: Documents generally are required to be kept for 3 years, a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. Tax and Corporate Filings should be kept for at least 6 years. .

o OFFICE ENVIORNMENT & EQUIPMENT: Decide which technology you need, including a computer, PDA, communication equipment, an office suite of software and computer peripherals like printer, scanner and storage devices. Outfit for visitors if your business absolutely requires them. Create a sitting area, and make sure visitors can access it without trespassing through your home. Make sure your office is safe and secure Hide your office from the view of strangers Install a security system. Create a system for backing up data and storing it offsite.

o COMPUTER & OFFICE ASSISTANCE: There are companies that will set up your computer system and service you via the Internet from a remote location. Keep separate folders for each client, resource, etc. There are websites that will help you set up your filing system. Search home office filing system.

o HOME DEDUCTIONS: It is important to understand the U.S. Internal Revenue Service's tax 587 guidelines for a home business or office. It is an outstanding resource when setting up a home business. The requirements and information are vital when seeking the maximum amount of home business tax deductions. Tax deductibles include a portion of the home's mortgage, the purchasing of telephone systems, Internet connections, a portion of the home's utility costs and other office supplies. See pub/irs-pdf/p587.pdf . You also may reimburse your business-related travel mileage, but you MUST keep a mileage log and calendar showing who and where you went on business. Check with a tax preparer to stay on track.

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