The Law: Making Sure Your Business Complies 1
1 | 2 | 3 | 4 |
Making It Legal
You're honest, hardworking, and you report all the income from your home business. So you don't have to worry about lawsuits, right?
Wrong!
No matter how small your business is, it is likely to be governed by a complex web of local, state, and federal laws. Some of these laws are designed to protect your customers, suppliers, creditors, and employees from being harmed by your business or its activities. Others protect you from competitors, suppliers, and even your clients. Still others exist (as municipal servants will invariably tell you) because "that's the way it's done" or because "that's what the law says."
Typical of this type of law is a statute in a New York State township requiring individuals who want to start a home business to get a building permit, have the home office inspected by a town building inspector, and get a certificate of occupancy for the "office" even if they will be working at the dining room table, won't be making physical changes to the home, and won't be having customers come to the house.
What do I have to do to make my business legal?
The regulations with which you'll need to comply in order to be legal vary according to what you do and where your business is located, but typically, with a business owned and operated by one individual who has no employees (sole proprietorship), you will need to follow some or all of these steps:
- Register your business name and get a certificate of doing business under an assumed name (commonly called a DBA). In some states you are required to register your business name whether you are operating under an assumed name or not.
- Publish your intention to do business in an official notice (required in some but not all states).
- Get required permits and licenses (these will be in addition to the DBA certificate).
- Comply with zoning regulations, regulations regarding signs on your business property, environmental protection laws (if any apply to your business), licensing laws, etc.
- Make arrangements to collect state sales tax if you sell taxable products or services.
- Keep accurate income and expense records and report your income to the IRS and state tax authorities.
- Pay owed income taxes and self-employment tax quarterly.
- Meet any specific bonding or insurance regulations your locality or state has instituted for your type of business.
Depending on the nature of your business you might also have to comply with noise codes, sanitation regulations, laws governing placement and size of signs, or other laws. If you add employees you will also have to comply with all applicable state and federal labor laws.
Are there any laws that could prevent me from starting a home business?
Unfortunately there could be. Despite the millions of people who work at home, many communities have zoning or other regulations prohibiting home businesses. Although the intent of such laws may be to maintain property values and prevent a residential neighborhood from turning into a little Main Street, most home businesses generate less neighborhood traffic and far less noise than the average car- or truck-driving suburban teenager.
Other laws or regulations might also interfere with your work-at-home plans, including labor laws, health codes, and licensing requirements. The only way you will know for sure what rules affect you is to ask appropriate local agencies and officials.
Why don't communities change the outdated laws?
Many communities are attempting to change the laws, but often change does not come easily. Municipalities may be caught in an intractable situation involving residents who want the change, residents who fear the change, and residents who howl "not fair" because their type of business will not be included among those deemed acceptable for home pursuit.
The resulting battle can be time-consuming and costly. The town of Southold in New York was sued after it implemented a zoning law change that allowed certain types of home businesses. The citizen who filed the suit (and won) claimed the new law was illegal because the town had not first done an environmental impact study. As a result, the town had to do the environmental study, schedule and hold new hearings, and then vote on the law a second time—a process that took many months.
1 | 2 | 3 | 4 | |
