Pages Menu
Categories Menu

Posted by on Dec 16, 2014 in legal | 0 comments

Legal Requirements When Setting Up a Home-Based Business

Legal Requirements When Setting Up a Home-Based Business

Even though you are going to be working from your own home, there are still legal requirements needed for any type of business. You should have all of these in place before you begin trading as a home-based business. It can be costly to rectify your errors at a later date, and may possibly risk the running of your business.

What type of business

A lot of home-based businesses are owned and run by a single person. Meaning that all you need do is file a Schedule C the next time you submit Form 1040. However, if you choose to trade as a Corporation, Limited Liability Company (LLC), or as a partnership there will be further business tax forms to file. Should you live in a state that has an income tax, your returns for the year could double. However, your liability will be protected should anything go wrong.


A LLC limits your potential liability costs. Some states allow a sole ownership business to trade as an LLC. Though there are some that require at least two people to be registered owners for this type of company.

Corporations do need more investment to set up. But they are ideal should you be looking at setting up a larger business.

If you don’t trade as an LLC or corporation, but have a partner, you should still get a partnership agreement drawn up by a qualified professional. Then any legal issues are covered to protect you both.


If you’re filing tax returns, it is highly likely that you will need some form of business licence. This will depend which city or county that you live in. Also, if you are intending to trade in a caring or professional level, you will require additional licences before establishing your home-based business. This would be an occupational licence if you are in the caring field. Alternatively a professional licence relevant to the service that you provide.

Sales Taxes


Rules regarding this area are different depending on where you live. So you need to inquire what needs of you once you have your home-based business. If in the trade of selling, or provide a service that is sales tax related then you will pay sales tax. You will also be required to have a sellers permit, and retail license.

Check Your Business Name

Before you invest in establishing a name for your home-based business, make sure that it isn’t already in use. Also, if it has a protected trademark or service mark. It can be an expensive mistake to make. Have a look at the company names that look or sound familiar. You could end losing all your custom to a competitor.

Zone Restrictions

Each state has particular zones where you would not be allowed to set up a home-based business. You may also find yourself restricted in a Homeowner and Condominium Associate clause, you can request a conditional use permit. To be awarded this, you need to be able to show your neighbors that it won’t affect the area. Impact on their lives in any way by having a home-based business close by.

Post a Reply