Home Business Regulations Taxes, Insurance, Licenses
Government Regulations and Your Home Business, Taxes, Insurance and Licenses
With the rapid advances in communications technology, it becomes more and more efficient and economical to operate a business from home. The basic legal issues, such as picking a name for your business, apply to all businesses. But there are also a number of legal issues unique to home-based businesses, and it pays to know the rules before you begin.
It may be inconceivable to you that your homebased business would have to comply with any of the numerous local, state and federal regulations, but in all likelihood it will. Avoid the temptation to ignore regulatory details. Doing so may avert some red tape in the short term, but could be an obstacle as your business starts to grow. Taking the time to research the regulations is as important as knowing your market.
Below is a checklist of the most common requirements that affect small homebased business. Bear in mind that regulations vary by industry. Carefully investigate the regulations that affect your industry. Being out of compliance could leave you unprotected legally, lead to expensive penalties, and jeopardize your business.
Starting a new business can be challenging. OSHA can help by explaining the federal regulatory requirements concerning safety and health and help you create a safe and healthful workplace for your employees that conforms to federal law. States with OSHA-approved state plans have adopted standards equivalent to OSHA’s. For addiltional information visit www.OSHA.gov.
There are many types of licenses. You need one to operate legally almost everywhere. If the business is located within an incorporated city limits, a license must be obtained from the city; if outside the city limits, then from the county. For more information contact the county or city office in your area or try these state web sites that offer business license information. State Business Licences
There are many forms of legal structure you may choose for your business. The most common structures are Sole Proprietorships, General and Limited Partnerships, C and S Corporations and Limited Liability Companies. Each legal structure offers organizational options which are appropriate for different personal situations and which affect tax and liability issues. We suggest you research each legal structure thoroughly and consult a tax accountant and/or attorney prior to making your decision.
Protect Your Ideas
U.S. Patents for an invention is the grant of a property right to the inventor(s), issued by the U.S. Patent and Trademark Office. The right conferred by the patent grant is, in the language of the statute and of the grant itself, "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or "importing" the invention into the United States. To get a U.S. patent, an application must be filed in the U.S. Patent and Trademark Office.
A Trademark is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others.
Search Trademarks A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product. Throughout this booklet, the terms "trademark" and "mark" refer to both trademarks and service marks.
Copyright is a form of protection provided by the laws of the United States (title 17, U.S. Code) to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works. This protection is available to both published and unpublished works.
If this pertains to your business, you may want to apply for trademarks, patents and your copyrights. Information regarding these applications is listed below.
To deduct business–use–of–the–home expenses, a part of your home must be used regularly and exclusively:
As the principal place of business for trade or business
As the place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business
In connection with your trade or business, if you use a separate structure that is not attached to your home.
In general, because of the exclusive–use rule, you cannot deduct business expenses for any part of your home that you use for both personal and business purposes. For example, if you are an attorney and use the den of your home to write legal briefs and also for personal purposes, you may not deduct any business–use–of–your–home expenses. The only exceptions to the exclusive–business–use rule are for qualified day–care providers, and for persons storing inventory or product samples used in their business.
In your state there is a percent sales and use tax which applies to the retail purchase, retail site, rental, storage, use or consumption of tangible personal property and certain services. In other words, sales tax must be collected on just about every tangible item sold.
Some types of coverage are required by law, other simply make good business sense. The types of insurance listed below are among the most commonly used and are merely a starting point for evaluating the needs of your business.
Home and Small Business Insurance
Liability Insurance -- Businesses may incur various forms of liability in conducting their normal activities. One of the most common types is product liability, which may be incurred when a customer suffers harm from using the business product. There are many other types of liability, which are frequently related to specific industries. Liability law is constantly changing. An analysis of your liability insurance needs by a competent professional is vital in determining an adequate and appropriate level of protection for your business.
Property -- There are many different types of property insurance and levels of coverage available. It is important to determine the property you need to insure for the continuation of your business and the level of insurance you need to replace or rebuild. You must also understand the terms of the insurance, including any limitations or waivers of coverage.
Business Interruption -- While property insurance may pay enough to replace damaged or destroyed equipment or buildings, how will you pay costs such as taxes, utilities and other continuing expenses during the period between when the damage occurs and when the property is replaced? Business Interruption (or "business income") insurance can provide sufficient funds to pay your fixed expenses during a period of time when your business is not operational.
"Key Man" -- If you (and/or any other individual) are so critical to the operation of your business that it cannot continue in the event of your illness or death, you should consider "key man" insurance. This type of policy is frequently required by banks or government loan programs. It also can be used to provide continuity in operations during a period of ownership transition caused by the death or incapacitation of an owner or other "key" employee.
Automobile -- It is obvious that a vehicle owned by your business should be insured for both liability and replacement purposes. What is less obvious is that you may need special insurance (called "non-owned automobile coverage") if you use your personal vehicle on company business. This policy covers the business' liability for any damage which may result for such usage.
Offices and Directors -- Under some circumstances, officers and directors of a corporation may become personally liable for their actions on behalf of the company. This type of policy covers this liability.
Home Office -- If you are establishing an office in your home, it is a good idea to contact your homeowners' insurance company to update your policy to include coverage for office equipment. This coverage is not automatically included in a standard homeowner's policy.