No Place Like Home Home businesses are a significant, though sometimes hidden, part of the small business community.
By Maria Meyers
Home-based businesses represent 52 percent of all small businesses, according to the Small Business Administration's Office of Advocacy. Home-based businesses can be found in 22 percent of all industries and make up 68 percent of all sole proprietorships, partnerships and S-corporations. One out of every 11 workers in the United States works from home, either part-time or full-time, and home businesses operate in 6 percent of U.S. households.
These numbers are impressive for businesses that are, on many levels, hidden.
With no storefronts, fewer than four, if any, employees, and very little in the way of regulatory wiggle room, home-based businesses share a disproportional burden of administrative tasks and federal regulations.
For these mostly solo business owners, the key to juggling tasks and taxes is, ironically, in teamwork-in building a network of resources and peer professionals to help manage the costs and trials of doing business at home.
Setting Up Shop Henry Beale, of Microeconomic Applications Inc., in Washington, D.C., calls home businesses "do-it-yourself business incubators" that provide start-ups with an entry point to the business world. And as with any start-up, the path behind the entry point should be paved with a sound business plan. Integral to the business plan is knowledge of the market and competition, the costs associated with setting up shop at home and a map for financially preparing to meet those challenges.
A good place to start building your team and your business is with your local economic development center, a micro-enterprise program, such as Kansas City's First Step Fund, or a business counselor from Kansas City's SCORE chapter. These organizations can point to, and in some cases provide, business training, mentoring and microloans to help create and implement your business plan.
Making It Legal One of the early leaders of your team should be a lawyer. Not only can your attorney help you file for any copyrights, trademarks or patents you may need, she can also guide you as you set up your business's legal structure as a sole proprietorship, limited liability company (LLC), S corporation, partnership, or C corporation.
Be sure to pair your attorney's advice with that of your accountant. While your attorney can give you legal direction on your business structure, your accountant can tell you how that will affect your taxes and your financial future.
Most home business owners choose to operate as sole proprietors. It's the easiest and least costly structure to maintain. At tax time, sole proprietors just file a Schedule C with their Form 1040. In Kansas, sole proprietors don't need to register their business name or DBA with the state. In Missouri, it costs $7 to file as a sole proprietor with your business name statement.
But some home-based business owners want a little more protection for their assets, their businesses and their families, even in the face of additional expenses and paperwork. To limit their liability, they may choose to incorporate or form a limited liability company. In Missouri, registering as an LLC with the Secretary of State costs $105. In Kansas, the online filing fee is $160. In both states, even a one-person business can form as an LLC. The discussions between your attorney and accountant can best reveal the legal and tax implications of your structuring decision.
After you've decided on the legal structure of your business with your attorney and accountant, you'll need to file for the appropriate licenses and, if you have employees, are incorporated or sell goods, your tax ID. You can find a new business checklist at www.kcmo.org by clicking on "Business" and then "Business Assistance."
When planning your business, set up a meeting early in the process with your local economic development center, which can guide you through the city, county and state permits, licenses and forms.
Making Connections Knowing what questions you have about your business goes a long way to finding out where you can get them answered. Cassie Woolworth, a partner in R&D Technology, said when she started her home business and then later moved it to an office, she didn't always know what she didn't know. Having a network of home business peers, often unrelated to her field, helped her know the right questions to ask and then find the answers.
She joined and is now president of the Small and Home Business Connection (SHBC), a kind of small-scale chamber of commerce of nearly 80 local home and small business owners who meet monthly for educational sessions and networking. There, she and other members have learned from each other how to insure their businesses and their homes, how to protect their computers and data, how to establish an e-business, how to prepare for tax season, and how, when and why to rent office space.Their presentations to each other serve as a way to grow their businesses' visibility and, often, clientele.
Some have even found accountants, graphic designers and insurance agents among their fellow members.
Maria Meyers, network builder, leads the KCSourceLink and U.S.SourceLink team. Founding sponsors of KCSourceLink, a program of the Institute for Entrepreneurship and Innovation at University of Missouri-Kansas City, are the Ewing Marion Kauffman Foundation, the Henry W. Bloch School of Business and Public Administration at UMKC, and the U.S. Small Business Administration. KCSourceLink's network services are free. For more information, visit www.kcsourcelink.com, call (816) 235-6500 or (866) 870-6500, or send e-mail to .
