From the May 2002 issue of Startups

The regulations on needed licenses and permits vary from city to city and state to state, so the best thing to do is go straight to your local city hall or Chamber of Commerce office to ask about the legal steps involved in starting your homebased business. You'll also need to check with your city's zoning department to find out about any zoning restrictions that would prevent you from operating a business from your home. As for taxes, this will depend on how you register your business--i.e., as a sole proprietorship, a corporation, a partnership, for example. For more information on setting up your business, see "Keep It Legal."