Since early 2020 when the COVID pandemic swept the globe, home-based businesses have grown exponentially. Unfortunately, there are all sorts of myths and malicious bits of misinformation about the practice of operating a company from the comfort of a private residence. The misconceptions range from ill-founded ideas about tax rates and hours to equally incorrect beliefs about cosigning for loans and the kinds of goods people can sell. If you’re getting ready to launch a small business, review the following points about common myths and their corrected versions.
Owners Must Pay Twice the Tax Rate
The doubling only applies to self-employment rates, not other types of taxes. The old double tax myth has been around for decades. It’s based on a misunderstanding of how social security taxes work. If you operate a self-owned company, then as the owner, you are legally obliged to cover social security taxes for yourself. But that means you’ll end up paying what’s called a self-employment tax, not twice the total taxes imposed on individuals who operate businesses.
Cosigning on College Loans Is Inconsequential
Being a cosigner can potentially affect your credit scores. Many entrepreneurs ask themselves how does cosigning a student loan affect my credit? It’s the most relevant thing to wonder about because there are risks and benefits for cosigners, regardless of the size or type of a given loan. Keep in mind that most owners and founders of small enterprises work hard to build up their commercial credit rating. So, if you cosign on a college loan and the primary borrower defaults, skips payments, or is often late, then your credit potential could suffer substantially.
So, if someone asks you to serve as their cosigner, even if you trust the person, take the necessary precautions. Avoid the urge to immediately agree just to help a friend or relative get approved for an education loan. Find out how the situation could affect your commercial and personal credit scores. Whenever you think about becoming a cosigner, be sure to consider all the possibilities and scenarios before putting pen to paper.
You’re Restricted to Online Goods & Services
Many people sell tangible products and crafts. For some reason, many mistakenly believe that at-home entrepreneurs are only able to sell digital goods or resell products via e-commerce stores. While those activities make up a large portion of the niche, there are millions of people who sell hand-made items, works of art, jewelry, and countless other tangible products.
Be Ready to Work Around the Clock
Schedules vary, and few businesses are 24/7 enterprises. Just because your home’s second bedroom is company headquarters, that does not mean it’s a 24/7 business. In fact, most domestic entrepreneurs keep regular hours or work part-time. Other only do their thing on the side whenever they get a bit of free time. But for those who wish to run an around-the-clock enterprise, doing so online is one way to go.
Customers Know You’re Working from Home
Buyers seldom have a clue about where you are located. Some are afraid to run a small company from their garage, attic, or basement because they think potential customers will know that the company is small and home-based. There’s no way for a purchaser to find out where your base of operations is located unless you make it a point to tell them. Many entrepreneurs use PO boxes or assigned mailing addresses to give the impression their companies are brick-and-mortar entities. Plus, most consumers don’t particularly care where a merchant is based if products and services meet their expectations.
Home-Based Owners Have Much Lower Expenses
Expenses are based on multiple factors. While setting up shop in the attic or running a consulting service from a spare bedroom means not having to pay additional rent for office space, small for-profit organizations have other expenses that can offset the savings on lease payments. Most online sellers tend to incur higher than average advertising costs. It can be difficult to stand out in a crowd of e-commerce sellers within a competitive niche, so various marketing and promotional bills can add up quickly. Expect to save on commuting, insurance, and rent. However, be ready to spend significantly more on promotion and marketing.
