Home sweet home: starting a home-based business

Starting a home-based business is a lucrative opportunity that requires you to become familiar with types of businesses and tax regulations. Here are some tips for setting up a home-based business.

If you're thinking of starting a home-based business, there's a lot to consider before opening your doors to customers. Starting a home-based business is a lucrative opportunity that requires you to become familiar with types of businesses and tax regulations. Here are some tips for choosing a home-based business and setting it up.

Generally, the kind of businesses that are best suited for a home base are either service business such as a cleaning company, a tutoring service, a consulting business, or a business that does not require large inventory.

You may also be restricted by either your province's zoning laws or covenants and bylaws of your homeowners' association. Zoning laws may restrict running a business in a residential area and your HOA by-laws may contain similar restrictions.

You could also buy into a franchise, as many are set up to be run as home-based businesses. A franchise gives you the benefits of an established brand, systems and procedures. However, it restricts your freedom to do as you please and requires you to sign a franchise agreement and pay the franchisor a monthly royalty.

Starting a home-based business has much in common with any business startup. Points to consider before starting a home-based business include:

Your business name should be both descriptive and unique. Come up with a business name that does not infringe on anyone else's business name. You can run into problems if you use a taken name, so check with the governmental agency in your province that grants business licenses and permits.

Each province will have varying requirements for licenses or permits. Begin by checking local government websites.

The basic choices related to the form of business are:

• Sole proprietor, where you are the only owner of the business.
• Partnership, where you own the business with another person.
• Incorporation, where you can have a company with shareholders. An incorporation may limit your personal liability, but it is more expensive to run due to filing requirements.
• Limited liability company, where you have one or more members who are also owners.

If you are running a home-based business, remember that you can deduct some car expenses, office expenses, some of your mortgage interest and a proportion of expenses like electricity and water bills on your tax return.

Thinking through the kind of business, planning for requirements like licenses and being aware of the tax advantages of a home-based business are all important considerations before you begin running a business from your home.