Many people want to start a small business at home for the flexibility and the chance to build something on their own terms. Here are the steps, broken down, you can take to launch and grow a home-based business.
Brainstorm home-based business ideas
If you're not sure what kind of business you'd like to start, brainstorm a list of home-based business ideas. One of the easiest ways to get started is by leveraging your existing skills and offering a service-based business. There’s no inventory to track or product to create since you’re monetizing what you already know how to do.
Here are some examples to consider:
- Freelance writing or editing.
- Marketing or social media management.
- Graphic design.
- Accounting or bookkeeping.
- Legal consulting.
- Personal training or wellness coaching.
You could also start a dropshipping business, sell handmade products through an Etsy store, launch a home-based bakery, or create digital products like templates or online courses. The possibilities are endless, so jot down some ideas and see which match your skills and the market demand.
Choose a business structure
The business structure you choose affects how much you pay in taxes, employees you hire, and how much personal liability you carry. There are four main business structures to consider:
- Sole proprietorship. While a sole proprietorship is the simplest option, there's no legal separation between you and the business. That means your personal assets are at risk if your business is sued.
- Limited liability company (LLC). An LLC is relatively easy to set up and creates a legal separation between you and your business, protecting your personal assets in most situations.
- Partnership. Formed by two or more people, a partnership can work well for a business with multiple co-owners.
- Corporation. A corporation is a separate legal entity owned by shareholders. If you're considering this structure, it's worth consulting a business attorney to understand the implications.
Get your finances in order
Once you've chosen a business structure, you will want to set up a business bank account early in the process. Keeping your personal and business finances separate simplifies bookkeeping and makes tax prep and filing significantly easier.
Before opening a business account, you'll likely need an employer identification number (EIN), which is a federal tax ID for your business entity. You can apply for free on the IRS website and will typically receive your EIN within minutes.
Taxes are one of the most confusing aspects for many small business owners, so hiring an accountant is a good idea if you lack the expertise and time required to calculate your business taxes. Your accountant can manage your quarterly and annual taxes and help you determine what expenses you can deduct at the end of the year.
Before you start serving clients, check whether your local zoning laws allow for home-based businesses.
How to navigate zoning laws and HOA rules before you launch
Before you start serving clients, check whether your local zoning laws allow for home-based businesses. Most residential zones permit them, provided the home is primarily used as a residence and that business activity doesn't disturb the neighborhood. But the specifics vary widely by municipality, so it’s a good idea to check.
For example, there may be restrictions on the number of employees who can work on-site, signage restrictions, and caps on the percentage of square footage dedicated to business use. Your local planning or zoning office can tell you exactly what applies to your address.
If you live in a community with a homeowners association (HOA), review your covenants, conditions, and restrictions. HOAs often have their own rules about business activity that exist independently of local ordinances, and violations can result in fines.
Manage licenses and permits for your home-based business
Beyond zoning, most home-based businesses need, at a minimum, a license or permit to operate legally. A general business license is the most common requirement. This license authorizes you to conduct business within a specific jurisdiction and typically needs to be renewed annually.
Depending on your industry, you may also need a professional license issued by your state. Businesses in regulated fields, like home healthcare or cosmetology, often require practitioners to hold state-issued credentials before they can operate. Check your state's business licensing portal to determine what applies to your business.
If you plan to sell taxable goods, you'll likely need a seller's permit and may be required to collect and remit sales tax. You can research the requirements on your state's secretary of state website.
Tax advantages of running a business from home
One of the biggest perks of starting a home-based business is the potential for tax deductions. Here are some potential write-offs to discuss with your accountant:
- Home office deduction. If you use part of your home exclusively and regularly for business, you may be able to deduct a portion of your mortgage interest or rent, utilities, and homeowner’s insurance.
- Business equipment and supplies. Computers, printers, office furniture, and supplies used for your business are usually deductible.
- Internet and phone. The business-use portion of your internet and phone bills can typically be deducted.
- Vehicle expenses. If you use your personal vehicle for business purposes, like meeting clients or making deliveries, you can deduct the standard IRS mileage rate.
- Health insurance premiums. Self-employed individuals can often deduct 100% of health insurance premiums paid for themselves and their families.
Promote your home-based business online
Marketing is essential for growth, but it doesn't have to be expensive. Start with a simple website that describes your products or services and makes it easy for potential customers to contact you. As you work with customers, you can add testimonials and case studies to build credibility.
Once your site is live, consider starting a blog around topics your ideal clients are already searching for to build organic search traffic. Social media is another low-cost way to reach your target audience. Focus on one or two platforms where your customers are most active rather than spreading yourself thin.
A Google Business Profile is a free tool worth setting up, even for home-based businesses that don't receive clients on-site. It improves your visibility in local search results and gives potential customers an easy way to find and review your business.
Set up a dedicated workspace at home
A designated workspace helps you focus, and it's a prerequisite for claiming the home office deduction. You may want to invest in comfortable equipment, like an ergonomic chair or adjustable desk. You’ll also need a reliable high-speed internet connection.
How to protect work-life boundaries when home is your office
It can be hard for home-based business owners to separate their work from their personal lives. Here are some ways you can set boundaries:
- Set office hours. Choose regular hours when you’ll start and end your workday. Creating transition rituals, like a short walk at the end of your workday, can help you mentally shift between work and home mode.
- Limit after-hours availability. Unless your business requires it, avoid checking email or messages outside of work hours. Tools like Google Workspace let you schedule emails so clients don't expect instant responses at all times.
- Communicate with your family. If your family members are home while you’re working, establish ground rules about interruptions during focused work time.
- Take real breaks. Step away from your desk for lunch and take short breaks throughout your workday to improve your focus and reduce burnout.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
