If the idea of working from home running your online business 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 many 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.
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.
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 online businesses. A library or bookstore can provide numerous books on business basics, and on the specific type of business that interest you.
Find out how your property is zoned, then call your 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 from 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.
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 your City Hall to find out what is needed for your particular business. In addition, Chamber of Commerce provides 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, you can consult with us for your graphics designs.
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.
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, computers, 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 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), and compare prices with the Post Office to see what will work best for your business.
STEP #19 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
STEP #20 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. Then, 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…etc.