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| Business Success |
Fifty million home-based businesses will be in operation by 1997,
according to Link Resource's National Work-at Home Survey. 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. 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, but
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, and also provide
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. For
ideas on different types of businesses, consult the end of this
article. Other ideas can be found in the source material listed at the
end of this article. 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. For
more information about this and other forms of business, send for the
U.S. Small Business Administration (SBA) Publication MP25. Selecting the
Legal Structure for Your BUsiness (50 cents). It outlines the
advantages and disadvantages of each legal type of structure. If after
reading it you are still uncertain what form of the business should
take, consult an attorney. 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 (see sources) is an excellent book
to start with. If you are considering a computer business, get in touch
with the association of Electronics; Cottagers, P.O. Box 1738, Davis,
CA 95617-1738. To keep informed of what is happening in home business
world, contact National Home Business report, P.O. Box 2137, Naperville,
IL 60566, for subscription information; and Mothers Home Business
Network, P.O. Box 423, East Meadow, NY 11554 (send SASE for free
information). STEP #7 CHECK ON ZONING RESTRICTIONS Find out how your
property is zoned, the call City Hall and ask what regulations apply to
home businesses in that zone. Also, if you rent or live in a
condominium, check the lease or homeowner's association rules to be
certain a home business is allowed. Generally, if you do not annoy your
neighbors with excess noise, odors, and traffic, 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 form 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, and how much money is need for
start-up costs. SBA Publication #M925, The Business Plan for Home-Based
Business ($1) is helpful. 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. But 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.
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