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What do Apple, Amazon, and Facebook, have in common? All were founded at home. Whether you have space in your basement, garage, or home office, you can follow in the footsteps of billionaire business leaders around the world who started their company from home. Mark Zuckerberg created Facebook, a company worth more than $400 billion, in a dorm room. Compared to that, working in a basement is a life of luxury!
And it’s not just billion dollar Internet and technology companies that are born in small, in-home spaces. This year’s National Small Business Week Exporter of the Year, Abram’s Bed LLC, was started by Rose Morris and her husband in the comfort of their own home. While working on their product, The Safety Sleeper™, they would work on “stitching in the basement and bending metal in the garage,” and it’s lead to selling over 1,000 products world-wide.
Here are five steps that have helped budding entrepreneurs (and can help you, too) get a business going from home.
Register your business with the state
The first step in starting any new business is registering your business. If you start working without registering, you are by default considered a sole proprietorship, but there are some legal reasons why it may be prudent to register with the state. In most cases, you can create an LLC or S-Corp by filing a few simple forms at your secretary of state’s website.
In addition to offering some legal protection and financial benefits as your business grows, registering shows others that you are serious about your business. It shows that you are thoughtful, professional, and may be worthwhile to hire or work with in a partnership. Registering with the state can vary in cost. In Colorado, for example, registering an LLC requires a $50 fee. In California, registering as an LLC requires a $70 fee but also subjects you to a minimum $800 annual franchise tax.
Get an EIN and open a bank account
Now that you have registered your business with the state, it’s time to tell the Federal government about your new company. You will do this by registering for an employer ID number, or EIN. Getting an EIN is free at the IRS website. Because the IRS does not understand how the internet works, you can only register for an EIN Monday through Friday from 7:00am to 10:00pm Eastern time.
You will use your EIN when filing your business taxes on a Schedule C (if your business is a single member LLC) or other tax form. You also need this number, which works like a Social Security number for your business, when opening a bank account.
While sole proprietors can use their personal bank account for their business, it is a best practice to use a separate bank account for your business under all circumstances. This helps with tracking your business revenue and expenses, which is important come tax time. Any expense directly related to the business can be deducted from your income, also called a write off, to lower your annual tax bill.
Ensure you can legally work from your home
In the HBO show Silicon Valley, the stars of the show are surprised in one episode to discover they are running illegally due to local zoning laws. Don’t learn the hard way that you are running afoul of the law. Instead, look into local ordinances that define where and how people can run businesses.
In most cases, you can work on a computer or online at home without any worries of breaking zoning laws as a solo business owner. If you have employees, run equipment or machinery, or do anything that may pollute, you may need to move from the basement into a property zoned for your type of business activity.
Create a professional appearance
While working at home gives you the freedom to work in your pajamas or free from the constraints of pants, it’s important to show others that your business is a “real job” and something you are serious about.
Create a productive and professional work area similar to what you would use if you were doing the same job for a large company. Also be sure to create a website for your business that is professional and user friendly. In this decade, if your business doesn’t exist online it might as well not exist at all!
Other steps that can make your business look more professional to customers, vendors, and anyone else include:
- A dedicated business phone line
- Using your own .com email address
- A quiet and clean area for conference calls and video calls
- A professional logo and consistent branding across your business
- A consistent, quality social media presence
- Familiarity with industry terms and jargon
- Knowledge of common software packages relevant to your business
- Professional business cards
This is just a short list and is focused toward online activities. Most home businesses have very few in-person visitors so it is important to look professional when you meet people in person or when someone discovers your business online.
Make a work friendly area for maximum productivity
One factor that can make or break the success of a company run from your home is your productivity. Ensure you have a work friendly area that offers maximum productivity for whatever it is you are trying to do.
That might mean a clear area in the basement for your carpentry projects to sell on Etsy. That might mean you park in the driveway and can use your garage to run the business. Or it could mean a dedicated home office with dual monitors and high speed internet.
Whatever it is you do, make sure to follow local ordinances, register your business appropriately, and do everything you can to stay focused and earn your lifestyle-sustaining profit. If you take care of the boring legal parts at the onset, you can run your business worry free and focus on the work you love.
This article was originally written on May 1, 2017 and updated on July 18, 2022.
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