Starting a home business?
You've decided to take the plunge and set up an in-home
business. Your neighbor, who has just gotten laid off from his machinist job,
has severance money and is eager to join you.
Getting a new business up and running takes business
skills and personality traits that aren't all that common: Do you have organizational
skills? Are you in good physical health and able to work long hours? Are you financially
prepared to wait several months before you make a profit? Do you know how to find
your particular niche in the market and how to identify your customers? The right
mind-set is just the beginning.
Next, you'll need a business plan. What type of company
do you want to own, and is your town large enough to support another similar business?
Talk to prospective customers.
If you are serious about having the business at home,
you'll need to check into how state and local ordinances and zoning laws will
If the operation will require heavy use of computer
equipment, make certain your electrical system can handle it.
Insuring a home-based business is often the last thing
new owners think about; they mistakenly believe their homeowner's insurance will
cover their business operations. But a home-based business will need separate
coverage for loss or damage to business equipment or inventory, or if a client
is injured while visiting.
You should also consider giving your business a formal
legal and financial structure. The legal structure can take a variety of forms,
such as a sole proprietorship, a partnership, a corporation, or limited liability
company. Each has its advantages and disadvantages, so you may want to call in
an attorney for help.
The financial structure includes how the books and
accounts are set up, and how the business will be financed over the long term.
A few discussions with an accountant before setting up the books can go a long
way in avoiding headaches down the road, especially at tax time.
Don't neglect the following
On those days when the possibility of success appears
bleak, remember that innovation powers the U.S. economy; new products make old
- Get both a federal tax identification number and a state sales-tax identification
- Obtain any necessary licenses.
As recently as 1993, the state-of-the-art Pentium
computer chip held about 5 million transistors on a sliver of silicon no bigger
than a fingernail. By 2007, Pentium-maker Intel Corporation says it will etch
1 billion transistors on the same minuscule space. This announcement brings to
mind the quote from U.S. Office of Patents Commissioner Charles Duell, way back
in 1899: "Everything that can be invented has been invented."
Starting your own business can be an exciting and
rewarding venture that can bring financial success, along with a sense of accomplishment