Starting a home-based business can be a great way to earn extra money while working from home. However, there are a few things you will need to do to make sure your business is legal and compliant with state and federal regulations.
Here are a few things you will need to do to start a home-based business:
Your business idea should be backed up with market research to support it, so be sure to find out as much as you can about the type of business you want to start. This includes researching the business and industry, talking to people in the same business or who have created a similar business, and attending seminars or workshops on the subject.
There are many great business opportunities that can be run from home, from Amazon, Etsy, and eBay sellers, to online stores, freelance writers, graphic design, craft businesses, candles, jewelry, and lots more.
One of the most important aspects before launching your business is researching your business idea. Make sure that there is a market for your product or service.
The greatest mistake that most people make is to fail to plan. There are a lot of details involved in starting a home-based business, and it is essential to have a well-thought-out plan before beginning.
It would help if you had a solid business plan before starting your business. This will include your mission statement, what you hope to accomplish with your new venture, as well as your marketing.
Business Licenses & Permits
You’ll also need to obtain the appropriate licenses and registrations. While the state of Missouri doesn’t require a business license, most cities and counties require some form of business license, even for a home-based business.
A business license is a permit that allows you to conduct business within that particular jurisdiction. The requirements for a business license vary from place to place, but most licenses are valid for one year and must be renewed annually.
City hall is the first place to learn the requirements and paperwork needed to operate your business legally. Offices within city hall issue zoning clearances, home occupation permits, professional licenses, and other local regulations.
Before starting any home-based business, it is important to consider what type of legal structure will best suit your needs and protect your personal assets.
There are four primary forms of business organization: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). There are many modifications and variations within these forms, but the key revolves around liability and taxation. In choosing your business structure, consult with a qualified accountant and attorney familiar with your resources and objectives.
A sole proprietorship is one of the simplest and most common structures for a home-based business, but there are other options.
A sole proprietorship is a business owned and operated by one person. It is simple to organize, and the initial startup costs are usually less than other forms of organization. The owner is entitled to all profits but assumes all risks and is liable for all debt. Under this form, personal assets may be at risk from a business lawsuit or paying business debts.
A general partnership is a business owned and operated by two or more people. Partners share all profits and are responsible for all losses stated in the partnership agreement. Each partner contributes to the business and has the authority to sign contracts.
A partnership agreement should be drawn up and kept on file with all partner’s signatures. If there are disagreements between partners, a meeting should be called to resolve the matter.
A limited partnership is one in which the partners have limited personal liability. It allows investors not actively involved in business operations to be partners without the risk of unlimited liability in a general partnership. A limited partner risks only their investment but must allow one or more general partners to exercise control over the business.
A corporation is a legal entity created under state law. It is owned by shareholders and managed by a board of directors. The shareholders are not liable for the corporation’s debts beyond the amount of their investment in the company. A corporation offers limited liability to its owners and
A business must file the Articles of Incorporation with the Secretary of State to incorporate.
Limited Liability Company
A limited liability company (LLC) is a good option if you want to protect your assets from any legal judgments or debts incurred by your business. An LLC also offers some tax.
An LLC is similar to a corporation because of the legal protection but can operate with more flexibility, like a sole proprietorship or partnership.
The people who participate in and run an LLC are generally known as members. Unlike a partnership, however, members have no personal liability for what another member of the LLC does or what the LLC itself does. Members of the company can be actively involved in the business management but are shielded from liabilities.
A sole proprietorship or partnership operating in the state of Missouri under a fictitious name is required to register that business name with the Recorder of Deeds in the county where their business is conducted. A name is considered fictitious if it contains the full name (first and last) of the owner or all general partners
Registering a fictitious name does not offer protection for that name, and there may be others using it for their business. Be sure to check if your name is available to use by doing a trademark search with the U.S. Patent & Trademark Office.
Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a number assigned by the Internal Revenue Service for tax purposes. An EIN is required if you have employees or plan to hire them or register as a partnership, corporation, or LLC.
You can obtain an EIN by applying online with the IRS.
Sales Tax Permit
A sales tax permit is required for any business that sells taxable items. This does not include businesses or transactions exempt from state or local sales tax, i.e., retail food, medicine, clothing costing less than $100 per item.
To obtain a sales tax permit, you need to have your fictitious name on file with the Recorder of Deeds’ office. If the name is not yet on file, you must put your fictitious name before getting a sales tax permit.
If your business is located in Missouri in one county but has customers in another, you can get a tax permit for each county in which you do business.
Apply for a sales tax permit online with the Missouri Department of Revenue.
Business Bank Account
To keep your business and personal finances separate, you need to open a business bank account. This account should be used for all business transactions, including income and expenses.
Even if you are working from home, you will need to have liability insurance in case someone is injured on your property.
Most home-based small-business owners purchase comprehensive liability insurance policies if they have employees.
It would help if you also considered other types of insurance, such as property damage, product liability, and theft insurance.
You can contact an insurance agent to determine what type of coverage would be best for your business.
No matter how good your product or service is, no one will know about it if you don’t market it. You will need a good marketing plan to get the word out about your business.
Most businesses require some financing to get started, and a home-based business is no different. You will need to determine how much money you will need and where you will get it.
As a business owner, you will be responsible for paying both federal and state taxes. You will also need to determine what type of taxes your business will be subject to.
Whether full-time or part-time, a benefit to running a business from home is the home office deduction which allows for a tax deduction from the business use of your home.
You can contact the IRS or the Missouri Department of Revenue for more information on tax requirements for businesses.
It is important to consult with an attorney and an accountant when starting any business. They can help you make sure that you comply with all the applicable laws and help you set up your business in the most tax advantageous way.
These are just a few things that you need to consider when starting a home-based business. By taking the time to plan your business carefully, you will increase your chances of success.