Did you know more than 52% of all small businesses in the U.S. are home based?
According to the Small Business Administration, there are more than 28 million small businesses in the United States, making up 99.7 percent of all U.S. businesses.
If you are considering or are in the process of starting a business from home, it’s an exciting and important undertaking. And as with any venture, it’s crucial to take the right steps to set yourself up for success.
Part of making sure you follow the necessary steps when starting a business from home can set the foundation needed to be successful. Here are five key financial tips to follow when starting a business from home.
1) Choose your entity structure
One of the easiest structures to start and cost the least to maintain is a sole proprietorship. If you select this structure then the legal name of your business is your own name. In most states, if you want to operate the business under a different name, you’ll need to file for a DBA, “doing business as.”
If you want to limit your potential liability then you may want to consider another entity structure such as a limited liability company. Be sure to consult with your attorney, accountant, or business counselor on the right entity structure for your business.
2) Obtain any required business licenses
As a home-based business chances are you will be required by your city or county to have a business license and permit to legally operate. Be sure to check your city or county’s website for details and the forms needed to file if required. The requirements and fees will vary based on your company’s activities, location, and rules outlined by your city or county.
3) Set up a designated office space
No matter how big or small your living space is, set aside a space just for your business. Since you will be running a business from home you are required to establish a workspace to use in your home regularly and exclusively for your own business purposes.
4) Open a business bank account
Your business bank account is a key financial tool that you will use to manage your business finances. From the moment, you start accepting or spending money as a business, you should have a business bank account set up. It enables you to keep accurate records, prepare reports, make deposits, and separate your business banking from personal banking.
To open a business bank account, you will need to provide your employer identification number) or social security number, if you’re a sole proprietorship), your business formation docs, ownership docs and business license if required.
5) Get a business credit card
A business credit card is a must have financial tool to keep your personal expenses separate from your business expenses. Not only does a credit card for your business make tracking expenses easy, it enables your business to start establishing its own credit identity and payment history with the business credit reporting agencies.
Starting a business from home can be challenging and overwhelming to say the least. There is a great deal to think about, organize, plan, and execute. The good news is there are many free resources, training, and support readily available to you both online and offline from the SBA. Be sure to check out all the free courses and support available through the Small Business Administration website.