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Legal Considerations for Launching a Home-Based Business

Business Entity Structure / Business Litigation / Family Business / Legal Agreements / Starting Your Business / Sticky Situations / Unexpected Business Risks

According to the U.S. Small Business Administration, more than half of small business startups in the last 10 years have been home-based.  Whether you are contemplating setting up shop at home as a consultant, a baker or a handy man, there are certain legalities that need to be considered to ensure you have protected yourself properly.

Choose the right name.  The name you have chosen for your business needs to be cleared first and then trademarked.  You can check with your Secretary of State’s Office to ensure the name is not already in use in your state and then perform a national trademark search on the U.S. Patents and Trademark Office website.

Choose the best business structure.  While you can start doing business right away as a sole proprietor, you should consult with a Creative Business Lawyer™ about the legal and tax advantages of business structures like a limited liability company (LLC) or S-Corporation.

Obtain a tax ID.  Sole proprietors may provide their Social Security number to customers or vendors, but it is better to obtain a tax ID known as an EIN from the IRS to safeguard yourself from identity theft.  EINs are required if you operate as an LLC or S-Corporation.

Get a registered agent.  If you decide to operate as an LLC or S-Corporation, your address becomes public record.  If you don’t want clients to know you operate from home — or wish to keep your address private — you can engage the services of a registered agent to receive your business and legal notices.

Obtain the proper permits or licenses.  Depending on the nature of your home-based business, you may need to obtain local permits or licenses to operate legally.  This is usually true for any business that sells food products to the public.  You will also need to check local zoning rules and your homeowners’ association covenants for any prohibitions against operating a home-based business.

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