For many people, before they jump into self-employment 100%, they start moonlighting or working on the side while still collecting a steady paycheck. For them, working out of the house for their side job is ideal. It has low start up costs and allows you to easily work, no matter what time you feel like doing so. But, there are 4 things that many people tend to overlook when it comes to home based businesses and if you don’t do your homework, you could get shut down or even fined. What are these 4 steps?

Business Creation

When starting a business, you need to make sure you are complying with state law for creating a business in the first place. Odds are you are going to start out as a sole proprietor, so in that sense you don’t need to fill out and file paperwork for creating a business entity such as a corporation or LLC.

But, if you are going to be using a fictitious name, then odds are you will need to fill out some paperwork. Your best bet is to go to your states website and find a link or links about starting a business. Most of the stuff won’t apply to you, but it is better to know what does and take care of it from the start.

Local Laws

In addition to your state, you have local laws as well that you need to abide by. You need to see if your neighborhood is zoned for home based businesses. In addition, if you live in a development that is run by a home owners association, you need to read over the bylaws. In the development my house is in, I am not allowed to have a home based business. Again, better to know from the start than to have a garage full of inventory and get shut down.

Zoning Laws

Another area to look into is zoning laws. This includes placing signs in front of your house with your business name on it, noise restrictions, number of employees in your house, etc. All of these things are regulated and most people completely overlook them. In fact, you may even have to take into account any traffic restrictions that might affect you doing business from home.


Finally there is insurance. Whenever you start a business at home, you have to talk to your insurance agents about your homeowners policy. Depending on what your business is, you might have to get additional coverage or see your current premium increase. This might make some readers think to skip this step, after all, what the insurance agent doesn’t know can’t hurt them, right? Wrong. Should something happen, like your house burning down, and it was due to your business, your insurance provider now has an “out” to not pay you for the claim.

This is because they were insuring a home residence and not a business. Even if you only used one room in the house for your business, they will still get out of paying your claim. Suddenly an extra $100 a year doesn’t sound so bad.

Final Thoughts

It’s an exciting time starting your own business and most people overlook the points above because they just want to get to working and making money. But these are very important things you need to do from the beginning. Otherwise hefty fines and the possible termination of your business could be the end result.