What Are the Requirements for Starting Your Home-based Business

You have your business idea and have researched your competition, but now what? The very next thing you should do is contact your county office and find out what are the laws regulating a home-based business. The laws are different in most states and sometimes even differ from county to county within a state.

Most home-based business owners operate as a sole proprietor, the simplest way to do business there is—it involves no more than filing a simple business registration, if that. That is its advantage, but it also comes with disadvantages. Chief among them is a sole proprietor is personally responsible for the debts of the business. If the business fails, the owner is legally obligated to pay the business's creditors.

Depending on the type of business you are starting, this may be good or bad. For instance, if you are going to be making and selling dog treats, this can be a sensitive issue. Should someone sue you for any reason, they will be suing you personally, which means your personal assets are vulnerable. While it may be more costly up front, setting up your business as an LLC (Limited Liability Company) or corporation may be a better option. Should your business get sued, your business is its own entity and incurs its debts separately from you. Creditors can not sue you and garnish your personal assets.

Because a sole proprietorship, a limited liability company, and corporation are only three of many options you might choose, it would be best to consult with an accountant and/or attorney about your plans so they can advise you as to the best business structure for you.

Along with your business structure, you will most likely need a DBA (doing business as) and a tax ID number (allowing you to purchase supplies at wholesale). Again, it will depend on your state's requirements.