Some entrepreneurs in Richmond with a dream they want to see come to fruition may one day decide to quit the rat-race and start a home-based business. This is not so unusual. The Small Business Administration reports that there are over 28 million small businesses in our nation, and 52 percent of these businesses are based in a person’s home. Deciding to start a home business is exciting, but entrepreneurs considering undertaking such an endeavor should make sure they take the appropriate steps to avoid making mistakes in the process.
First of all, an entrepreneur will need to decide on the structure of their business. For example, they may decide on a sole proprietorship. This means the legal name of the business is the entrepreneur’s name, unless the entrepreneur has a DBA, or doing business as, filing in place. On the other hand, other entrepreneurs wish to shield themselves from liability in their business. If this is the case, they might choose to create a limited liability company. That being said, before choosing a business structure, it is important to meet with an attorney, to make sure all the legal requirements are met.
Second, it may be necessary when establishing a home-based business to obtain any necessary licenses from the city or county where the business is based. In addition, when creating a home-based business, a place in the home should be dedicated solely to business operations, and the entrepreneur should only conduct business in this space.
Also, it is important to establish a business bank account that is separate from the entrepreneur’s personal banking accounts. This allows the entrepreneur to keep accurate records of the business’s finances and to ensure that business funds are not commingled with personal funds. Finally, an entrepreneur may want to obtain a business credit card. Again, this is meant to ensure that the entrepreneur’s business funds do not commingle with his or her personal funds. Having a business credit card makes it easier for the entrepreneur to keep track of business expenses. It also allows the business to establish a credit identity with credit reporting agencies, as well as establish a history of payments made.
As this shows, while it is exciting to start a home-based business, entrepreneurs should not rush the process. By taking the time to ensure that all proper legal steps are taken before opening the business’s doors, entrepreneurs can set themselves up for success.
Source: SBA, “5 Key Financial Tips When Starting a Business from Home,” Marco Carbajo, Aug. 14, 2017