Owning and operating a home-based business can be very liberating. Working for yourself brings home-based business owners freedom that is addictive.
It can also cause one to forget that they have to follow the same rules as any other brick and mortar business.
Just because someone runs a business from home does not mean that the owner can escape the same responsibilities of any other company, nor does it mean a home-based business is immune to legal problems.
With almost 30 million small businesses (PDF from www.sba.gov), most of which are home-based, in the United States, it is not surprising they contribute a lot to the country’s economy and employ nearly 49 percent of United States workers.
For those who run a home-based business, these three legal issues should be avoided.
If one finds themselves facing legal problems because of one or more of these issues, this article will also list a few ways to prepare for them.
1. Failing to Establish the Home-Based Business as a Legal Entity
One of the most significant mistakes owners of home-based business make is failing to establish their small business as an entity.
One can choose a limited liability company (LLC) or even a corporation, which will depend on what the owner is looking to do with the business.
This step is vital to protecting one’s self and their company from future liability issues
If the home-based business involves selling on Amazon or eBay, an LLC should be sufficient.
For those home-based businesses that deal with technology, such as web design, programming, Internet security, or other tech-related fields, a corporation might be the way to go.
One can also consult a local business attorney to find out which one is best.
2. Failing to Obtain the Correct Licensing, Documentation, and Insurance
Some states require a home-based business to hold a business license of some sort. One will need to inquire about this with the appropriate local and state authorities.
If the state does not require home-based businesses of certain kinds to hold a license, other licenses may be required, such as for those looking to sell items online.
Even running an Amazon or eBay store may require a home-business to obtain a seller’s license.
Be sure to research and become familiar with local and state business laws before jumping in.
3. Failing to Keep Track of and Paying Mandatory Taxes
It is not uncommon for home-based business operators to either fail to keep track of tax obligations or choose to ignore them.
Though many individuals get away with neglecting business taxes, it does have a way of catching up to people once in a while, and at the most inopportune times.
A business’ tax situation changes as things progress for a company, and that includes home-based businesses.
Not only that but new tax laws are passed annually, so business owners need to stay informed and keep their tax information current and up-to-date.
Ignorance of tax laws plagues many home-based businesses; however, ignorance does not free one of liability.
Nevertheless, for those who made a few errors and find themselves in trouble with the IRS, it is always possible to find tax debt relief through various programs.
All one has to do is contact a tax attorney who specializes in tax negotiation and mediation to solve the problem. But it is definitely not advisable to approach such situations alone.
Always consult with an attorney who is highly trained and knowledgeable of such topics and allow them to be a representative on your behalf.
