I’m participating in the eMoms “How To” Group Research Project. There were a lot of great topics to choose from, and I chose to write about how to get a business started from the perspective of legal issues, bookkeeping and writing a business plan.

Setting up a home business sounds pretty easy. In a lot of ways it is. However, there are some aspects you should consider to make your life simpler in the long run. Many people skip certain details because they don’t see the need. But if you get it wrong you can greatly complicate your life and make it harder for your business to succeed.

Basic Legal Aspects

I’m not a lawyer, and you will need to check the exact rules in your area, but there are a few basics I can tell you to check. One of the first things you will need to consider is whether your home business will be a sole proprietorship, partnership or corporation. Most home businesses start as a sole proprietorship, as this is the easiest to set up. Setting up a corporation or LLC has certain tax advantages, but can be more complex than many people want to deal with right at the start.

You may need to get a DBA (Doing Business As) or FBN (Fictitious Business Name), especially if you are not using your real name in your business. Some areas may require one anyhow.

Your area may require that you publish your use of this name in a general circulation newspaper. This is very easy to do, and you will probably start receiving ads in the mail from companies that offer a section for these ads. You will have perhaps a month in which to do this, and your ad will need to run for more than one issue in many areas. Your county clerk can help you understand the rules in your area.

You may also need to get a business license. Some areas don’t require this for home business, but others do. This may be required at either the state, county or city level.

How easy this is can depend on the zoning laws in your area. Some say you can run just about any home business, so long as you don’t add to the traffic in the area or store too many supplies. Others make it much more difficult. These generally vary by city, but some states add requirements of their own.

These days it should be very easy to find out what you need to do for your area. Type “your city name business license” into a search engine and you will probably come up with the section on your city’s website dealing with business license requirements. If you aren’t clear on what you need to do from the website, go in to the office or call them to ask for clarification.

In some cases you may need a resale permit. This is only if you are selling items subject to sales tax. You may be responsible for collecting sales tax in this case as well. However, if you’re doing affiliate marketing or selling a service, you probably don’t need a resale permit. When in doubt, check with your state.

You will need to pay taxes on your home business income. Running a home business means you need to handle this yourself. You are responsible for your income tax as well as self-employment taxes, which cover your Social Security and Medicare contributions. You will need to file Schedule C for your business, and Schedule SE for the self-employment taxes. Or you can use an online software that will help you with all that. Many people find online filing much simpler.

If you expect to owe more than $1000 in taxes at the end of the year, you will need to file quarterly estimated taxes. These are due April 15, June 15, September 15 and January 15 each year.

Don’t forget to visit the IRS website or to consult a tax professional when in doubt.

Bookkeeping

Keeping track of your income and expenses with your home business is important yet easily neglected. But it can also be fun once you realize that it’s showing you when your home business is becoming more profitable.

The first thing to do is to keep your home business and personal receipts and expenses separate. One of the easiest ways to get this started is to get a business credit card or even just decide that a credit card you have right now will only be used for business purchases. Doing this will make the difference between the purchases clearer, especially if at some point down the line you get audited by the IRS.

I keep all my online purchases filed when they’re for my home business. I use GMail for this, but you can use other programs. I have a label in my emails for each year’s business purchases. This makes it easy to print as necessary. I also have a physical file for business receipts and paperwork for things that are not online.

Similarly, have a separate checking account for your home business. This is where all the payments you receive for your business should go, and how you pay the bills relating to your home business. Your bank will probably want your DBA or FBN paperwork in order to open an account in the name of your business.

Many people like to use software solutions such as QuickBooks to keep track of their business expenses and income. This greatly simplifies things when you are figuring out taxes and such. You can also consider hiring someone to handle the bookkeeping aspects of your home business.

No matter what, take your bookkeeping seriously. Keeping up with this makes your life much easier. If you don’t do it for every purchase, take a little time at least once a month to get your books in shape.

Having a Business Plan

Many people start a home business with no more plan than this:

SUCCEED.

That’s not much of a plan. You need to have more than that.

A good plan will help to guide you as your build your home business. It should be a flexible document, as you discover that your goals shift and your abilities change. But it should also be solid enough that you can refer to it when you aren’t sure where to go.

You don’t have to do a highly detailed business plan. Most people starting a home business aren’t applying for a loan from a bank, and therefore do not need to get into the details a bank would need. Your business plan should focus on what you need to plan. It should also help you to take your business more seriously.

A formal business plan has a variety of elements, such as the executive summary, company description, marketing plan, operational plan, financial history and financial plan. You can get that detailed if you like, or you can make your plan much simpler.

A simple business plan is all that many home businesses require. You can break it up similar to how a traditional business plan is, keeping the sections shorter, or just wing it. What is your business? How do you plan to market it? How will you run it? How will you make it grow? But if you don’t want to write that much, even a few sentences is enough for your own reference.

It does not have to be something planned for other people to read. If you don’t need a loan, a business plan is in large part to motivate yourself. Write out your short term and long term goals.

A business plan should be realistic. Sure, many of us would love to be earning 6-7 figures annually, but that’s not going to happen for everyone, and it rarely happens quickly. Your goals should be a cross between your dreams for your business and what you know you can do.

Take out your business plan at least once a year and review it. It can be very educational to see where you wanted to be versus where you are. This will help you to spot your weak points and things you need to work on. It can also inspire you as you realize just how far you’ve come.

Of course, there’s still more to starting a successful home business. It takes time, and you have to make a lot of decisions. But these are aspects that you will want to have set up correctly from the start. They’ll make your life much easier in the long run.

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