More than half of all businesses today are home-based and this trend has been magnified because of the Covid-19 pandemic. People are striking out and achieving economic and creative independence by turning their skills into a means of earnings.
Garages, basements, and attics are being transformed into the corporate headquarters of the newest entrepreneurs that is, the home based business people.
And, with technological advances in the virtual space, along with smartphones, tablets, and iPads as well as rising
the demand for “service-oriented” businesses, the opportunities seem to be endless.
Is a Home-Based Business Right for You?
Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take the time to learn as much about the market for the products or services you intend to offer. Before you invest any time, effort, or money take a few moments to answer the following questions:
Before you dive headfirst into a home based business, you must know why you are doing it and how you will do it. To achieve success your business must be based on something greater than a desire to be your own boss and involve an honest assessment of your personality, an understanding of what’s involved, and a lot of hard work. You have to be willing to plan for the long-term and be willing to make improvements and adjustments along the way.
While there are no “best” or “right” reasons for starting a home based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:
Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment. If at all possible, you should set up a separate office in your home. You must consider whether your home has space for a business and whether you can successfully run the business from your home. If so, you may qualify for a tax break called the home office deduction. Please call if you’d like more information about this tax break or to find out if you qualify for the deduction.
Compliance with Laws and Regulations
A home based business is subject to many of the same laws and regulations affecting other businesses, and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.
Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.
Restrictions on Certain Goods
Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.
Registration and Accounting Requirements
You may need the following:
If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.
Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.
Estimating Start-Up Costs
To estimate your start-up costs include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment, and promotional expenses. In addition, business experts say you should not expect a profit for the first eight to ten months, so be sure to give yourself enough of a cushion if you need it.
Projecting Operating Expenses
Include salaries, utilities, office supplies, loan payments, taxes, legal services, and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs but make sure it meets yours as well.
One of the most important skills you will need is knowing how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points, and cash-flow statements. Use your marketing research to estimate the initial sales volume.
Determining Cash Flow
Working capital – not profits – pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.
Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.
If a home based business is in your future, then a tax professional can help. Don’t hesitate to call if you need assistance setting-up your business or making sure you have the proper documentation in place to satisfy the IRS.
User | 19/10/2020