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21 Steps: How to start a Home Business
Fifty million home-based businesses will be in operation by 2010, 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.
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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 here 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. 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.
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 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 Licences & 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, Stationary,
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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SOURCES
SMALL BUSINESS ADMINISTRATION. Pamphlets mentioned in this article are
available by calling the nearest SBA office
or ordering from SBA, P.O. Box 15434, Ft. Worth, TX 76119.
Yes! take me straight to the
Source