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Legal Issues

Make sure to answer these three legal questions when starting a homebased business.

Q: What are the most common legal oversights? As a new business owner, I want to make sure I'm not missing something important.

A: Here are some common legal questions you should contemplate before starting a homebased business:

Can you legally work from your home? If not, you may receive a cease and desist order from your county, city or homeowners association requiring you to stop operating your business at home. You can prevent this by checking the zoning code and association governing documents posted on most city and large homeowners association websites. Even better, talk with an attorney to ensure you're in compliance. If your business violates zoning laws, you may be able to get a conditional use permit or a variance from the city or county.

Do you need to collect and pay sales tax on your product or service? Failing to collect could hurt you if you receive a notice for past-due sales tax plus penalties and interest. You may also need to get a seller's permit, a certificate of authority or a resale certificate from the state agency that administers sales tax collection. The types of products and services considered taxable vary from state to state.

Are you encroaching on someone else's trademark? If so, you can expect to be forced to change your business name, since you probably can't afford to litigate the issue. To reduce the chances of this happening, do a trademark search at the United States Patent and Trademark Office and check your state's trademark database. If there's even the slightest doubt in your mind, consult an attorney.

These are just a few common oversights. Also make sure you find out if you need a license to conduct business and if your state levies a tax on gross receipts.



Authors and career coaches Paul and Sarah Edwards' new book is The Best Home Businesses for People 50+. Send them your questions at www.workingfromhome.com or in care of Entrepreneur.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the April 2005 print edition of Entrepreneur with the headline: Legal Issues.

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