Might you not be complying with laws that could cause you difficulty? There are a variety of legal issues other than zoning involved in running a business from home but often people are unaware of these issues until problems arise. Here are four of the most common legal oversights home-based business owners don’t realize they need to address. `
1. Business licensing requirements. Most communities require a business license to operate any income-producing enterprise of any size. That means home businesses too. But many home business owners don’t realize this requirement applies to them. “I’m just a consultant,” one person told us, “I’m sure I don’t need a license.” “I’m not a business” a psychotherapist responded, “I just have a part-time private practice.” Actually, whatever you call a home-based activity, if you’re earning income from it and your city or country requires a business license, chances are that means you too. While business licenses are simply revenue generators for local governments, going to the trouble to take out a business license has indirect benefits to you. It says that you take your business seriously. It makes a statement that you want to make your venture official. It reflects a desire to pay attention to details, to dot the I’s and cross the T’s, to do the homework that will not only get your business off to a good start, but which will be reflected in other aspects of how you run the business as well. So make it official. Get your business license.
2. Checking the availability of and registering your business name. If you are using a name for your business other than your own proper name, you could be using a name that’s already be in use or one that is protected by a trademark or service mark. There can be serious legal consequences of even inadvertently using a name that’s already in use by someone else. You may be forced to change your name and have to start rebuilding your identity and, of course, reprinting all your materials. But whether there would be legal consequences or not, using the same name as someone else can be confusing and dilute your marketing efforts. Once you’ve found a good name that’s bringing business to you, you don’t want anyone else using it. So:
- Check your county’s website for fictitious name registrations, also referred to as “dba’s”–“doing business as.” You can see if the name of your choice is already registered, but don’t limit your search to this.
- Check online and print phone books and yellow pages. The major online directories are InfoSpace, Anywho, Switchboard, SuperPages, and Yellowpages, 3. Check the state office that handles corporate names, usually the secretary of state, to determine whether someone has reserved or taken the name for corporate use.
- Check domain name registrations. Most domain name registrars offer access to the WhoIs database or you can use sites like easywhois.com or whois.net to see what’s available and get ideas for variations that are software generated.
- To be sure that the name you want to use does not violate someone else’s claim on it as a trademark or service mark, even if you plan to operate only locally, you will need to do a trademark search. A trademark is a word or logo that identifies a product; a service mark offers the same protection to a service. You can do the search yourself for U.S. trademarks or have it done for you. A trademark search firm (you can find them on the web) can search for you, but a trademark and patent attorney can advise you whether your name is the type that can be registered as well as conduct the trademark search. The attorney will check for legally similar names as well as exact duplicates at the federal level and in all fifty states. Expect to pay a trademark search firm several hundred dollars; an attorney will cost more.
3. Collecting sales tax. If you are selling a product like software, a shopper’s guide or arts and crafts, you will need to collect sales tax on the sales you make to the end user. If you sell these same items to a wholesaler or retailer who will in turn sell them to the end user, you do not need to charge sales tax. Instead, you will need to make sure that your buyer has what is variously called as “seller’s permit,” certificate of authority,” or “resale certificate’ from your state. You need to keep verification of this on file with their account.
Some services are also required to collect sales tax as well. Which ones will vary by state, but some states collect sales tax on such services as graphic design, desktop publishing and word processing. To find out if any aspects of your service are taxable, contact the agency in your state that handles sales taxes.
Be sure to find out about any sales taxes you may owe, because fines and back taxes can be substantial.
4. Condo and home owner associations restrictions. Some home owners’ and condominium associations regulations restrict or preclude any use of the property for income-producing activity. So to insure your ability to work from home, find out about any such regulations before buying a new home if possible and if not, determine whether these limits can be waived or changed. You may have the opportunity to convince your neighbors that your business will not detract from the value of their property or interfere the quality of life in the neighborhood. You can also educate them as to the security benefits of having people working from home.
Comments and questions on the substance of this blogs are welcome. If you have other questions about this website, please contact me directly for a consulting appointment. [maxbutton id=”11″] If you think we can help you, we offer webinars and consulting. mailto:elmstreeteconomy.com
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