Legitimate Home Based Business – Five Things To Keep Your Business Legal

A legitimate home based business needs to ensure it stays on the right side of the law. It’s not enough to have a business idea, a plan and enough finance to start off your own home business. You do not want to be penalized for some illegal activity six months down the line. We’ve put together a list of five important things you need to get before opening up your business to your clients.

Go through this checklist to ensure that your home business is legal:

1. Licenses and Permits: The first thing you will need to make sure your home business is legal, is a license. Contact your city office to obtain one. You will be asked to fill up a form and pay an annual fee. This license has to be renewed every year as long as you are in business. Depending on the kind of business you are involved in, you may need additional permits like a food permit, zoning permit, state occupational license and seller’s permit. Contact your local county or city office for details regarding the permits you will need to apply for.

2. Employer’s Identification Number: If you have employees, are in a partnership, or are incorporated you will need a federal Employer’s Identification Number for filing tax returns. If you are a sole proprietor and have no employees, you can use your Social Security number as your tax ID number. You can obtain an EIN through the Internal Revenue Service. As a legitimate home based business, you cannot avoid this requirement.

3. Business Name: Naming is very important for a legitimate home based business. Make sure you don’t give your business a vague or generic name. You want your customers to remember your name and you want them to know what it is that you do. But first things first, make sure that the name you choose is not already taken. Check the telephone directories to start with, and then check with your county clerk’s office. They will have all the business names in your area on file. If you decide to name your business by your surname, all you have to do is enter that name in the business license form. However, if you choose any other way of naming your business, you will require a DBA (doing business as) registration. Contact your county clerk’s office. Some US states always require you to file a DBA and most banks won’t cash your checks if you haven’t registered your business name.


4. Business Insurance: Most home-owners insurance policies will not cover a home business. Your needs will vary depending on the nature of your business and whether you will have clients come to your home. Check with your agent and choose an insurance package that is appropriate for your business.

5. Legal help: We’re talking about ensuring your home business is legal, right? So it stands to reason that one of the best assets it can have is an attorney. You may wonder why you need a lawyer, of all things! Take our word for it, you will need legal assistance while setting up a partnership or corporation, checking for compliance with regulations, negotiating loans, obtaining trademarks or patents, preparing buy-sell agreements, doing tax planning, reviewing business forms, negotiating and drawing up documents to buy and sell real estate, reviewing employee contracts, exporting or selling products in other states and collecting bad debts!

If you have these five elements in place, most of the legal requirements will have been taken care of. Of course, as a legitimate home based business there will be other ongoing legal issues to deal with as you grow. However, you are off to a good start!

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