Occasionally doing work from home typically doesn’t count as a home-based business for legal or insurance purposes. However, if you decide to start selling cookies out of your kitchen, you’re in business. There are some gray areas that can make it more difficult to determine if you have a home-based business and whether or not you need to worry about insurance and an assortment of other important considerations. Below, we clarify what typically counts as a home-based business.
The Official Definition
According to Entrepreneur.com, a home-based business is defined as one that has its main office in your home. For official purposes, a business that’s considered based in your home can be any size, even if it’s just one person. It can be as simple as you creating a website and providing home-based assistance via your computer, tablet, or laptop.
Whether or not you can legally run a business out of your home largely depends on where you live and what you want to do. Your local homeowners association may have guidelines that apply to what kind of sign you can post on your door or home if you want to bring clients or customers into your home or advertise that you have a business in your home. There are also typically concerns about such things as:
• Increased traffic on your street and around your home
• Any employees you may be hiring
• Your business hours or planned hours of operation
• Potentially dangerous materials that may be in your home for your business
Alleviate these concerns by presenting a business plan to your local municipality and HOA. By doing so, you won’t be surprised with any violation notices or threats of legal action. Plus, it’s generally a good thing to have the official blessing of your local community.
Seasonal or Temporary Businesses
You might want to make some extra money for the holidays by selling those tasty cookies we mentioned earlier. In this case, you have a home-based business, even though it’s going to be a temporary one. For tax purposes, you’ll need to report your income, even if it’s just from a business that’s seasonal.
Even if your business is temporary or seasonal, you’ll at least need liability insurance to protect yourself against potential lawsuits. If you have separate commercial insurance for your home-based business, a customer who slips and falls while coming to pick up some cookies can’t go after your life savings or other non-business income.
If you’ll be permanently running a business out of your home, you may want to consider additional coverage. If you’ll be hiring a few extra employees, you’ll definitely want workers’ compensation coverage. It can also be helpful to meet with an insurance agent before you start your home-based business so you can determine if you actually have an official business and, if so, what kind of insurance you’ll want to consider.
Owners of home-based businesses need to make sure they protect themselves by purchasing the right insurance coverage. For affordable, reliable business insurance as well as homeowners, renters, motorcycle, and car insurance, call on the trustworthy professionals at Altra Insurance Services. Reach out to us today at (619) 404-6311 to learn how we can satisfy all your insurance needs.