For many home-based business, one challenge is to keep up with the myriad legal requirements. Here are tips on making sure that your business meets all the legal requirements of your area:
1. Know the rules affecting your business
Before you start your home-based business, find out what government regulations specifically apply to your type of business. You may not be aware that your state prohibits making food products from a home kitchen, or that you need to be licensed to start a daycare from your home.
Some businesses are more regulated than others; so it is important as one of the first steps in starting your business to research on what the legal requirements are for your specific business. Talk to other business owners in the field, read online about the rules of the state, or call your local or state authorities to check on the laws that you need to know.
If you live in an area with strict homeowner’s association guidelines, be sure to read up on what you can do and cannot do while running a home-based business. Your HOA or apartment rules may have restrictions on the traffic and comings-and-goings of customers in a residential neighborhood or building. There may also be rules with regards to parking cars with business wrappings or signage.
2. Do not neglect to file your fictitious names
The name of your business can be one of its biggest assets. As new business owners, you need to make sure that you register the names that you want your business to be known for. Often called “fictitious names,” “Doing Business As” (DBA), trade or assumed name, registering your fictitious name is important. Banks typically require proof of business name registration to open a bank account under your business name.
Business name registration is typically done at the county level. Typically, sole proprietors using their given name as business name do not need to file a fictitious business name registration. However, there may be instances when you need to file a fictitious business name even if you are a sole proprietor using your last name so check your local county for the rules. For example, your business name implies that there are more than one owner such as Rodriguez and Sons Plumbing Co.; or that you want to make sure that G.R. Plumbing Co. is really George Rodriguez’s plumbing business.
If required, check with the weekly newspapers in your area to get the lowest rate for publishing your fictitious business name statement. Some states, such as Virginia, do not require the publication of the business name, while other states such as California require it.
If you plan to operate your business under more than one fictitious name, check whether your local or state government allows you and the process on how to do it. In some states, you may be able to file as many fictitious names you can have as long as you register each of the fictitious names that you can use. Check if it is possible to list all fictitious names you want to use in one registration (up to five names are allowed), or whether you will have to file a business name registration for each of them.
3. Get your seller’s permit
When applying for a seller’s permit, remember that the lower your estimated sales for the year, the less money you will have to post as a bond.
4. Be careful how you use your reseller permits.
You should only use your reseller permit to buy products and inventories that you will directly sell in your business. You are not allowed to use your reseller permit to purchase items for your personal or household use, supplies and equipment that you use for your business, or for items to be given away. Check the government guidelines on how you should use your reseller permit.
5. Consider hiring subcontractors
Reduce your overhead and paperwork by utilizing subcontractors instead of employees whenever feasible.
6. Get your IRS Employer Identification Number
If your business is a partnership, be sure to obtain an IRS employer identification number (for U.S.) or business tax ID for other countries, whether you have employees or not. This is required for your tax return. Weigh the advantages and disadvantages of each legal form before selecting the one to use for your business.
7. Protect your Intellectual Property
If you are unable to patent your invention, you may still be able to use a trademark or copyright to protect your rights to it.
8. Hire professionals
Utilize the services of attorneys or other experts in complying with government regulations, structuring your business, or obtaining a patent or trademark.
- Most Common Questions Asked When Starting a Business
- Small Business Legal Checklist
- 21 Steps to Starting a Home Business (Part 2)
- What Do You Need to Open a Daycare Business?
- Understanding Trademarks & Protecting Business Names (Part 2)