Legal Issues

6 min read
Opinions expressed by Entrepreneur contributors are their own.

You can't escape them. Sooner or later you're going to have to face them. If you're serious about starting a business from your home, fulfilling your legal obligations is not something that you can just sweep under the porch welcome mat.

What are your legal obligations? One of the first things you need to do is decide upon the legal form under which your business will operate. In addition, you'll need to file for a business license with the city in which you will operate. If you are located in an unincorporated area of a county, call the county clerk for information regarding licensing within the county.

Another legal hurdle you'll confront when applying for your license is zoning ordinances. A business license must typically be processed by a city's planning or zoning department, which checks to make sure the zoning statute allows the business to operate.

Common sense and a little homework will save the homebased entrepreneur a lot of headaches. Before starting your business, research the zoning controls in your community. Ask the city's business licensing or planning department for a local interpretation of industry regulations.

Restrictions vary widely from town to town, but the most common regulations fall into the following eight categories:

1. Noise -- There should be no evidence of work being performed on the premises that can be heard by neighbors. Noise restrictions may be as detailed as a specific decibel level, or may be more general -- forbidding industrial machinery, pounding, hammering or whistles. There may also be time limitations (for instance, no music lessons after 7 p.m.).

2. Odor -- There should be no evidence of any work on the premises that the neighbors can smell. For example, an offensive odor, chemical fumes which permeate the air, or a carpentry business that raises a lot of dust would probably be prohibited in most residential areas.

3. Employees -- Other than yourself, you may have no more than three employees. In some communities, "employees" must be residents of the house or relatives of the business owner.

4. Traffic -- Any increase in car, truck, or pedestrian traffic may be illegal. Vehicle traffic usually violates restrictions on noise and odor. Taking up limited parking spaces can prompt complaints from neighbors.

5. Electronic interference -- Operating industrial machinery, such as power tools or electronic equipment, can disrupt your neighbors' right to sit at home and enjoy their televisions or stereos.

6. Signs -- Some communities permit 9 12-inch window signs; others allow a sign no larger than the standard front-yard real-estate advertisement. Many cities prohibit signage altogether. Neon or lighted signs are out of the question in most areas.

7. Sales showrooms -- Many towns prohibit selling anything from home, except by phone or by mail order. Contributing to this constraint is the fact that many zoning laws prohibit any kind of business that involves inventory.

8. Miscellaneous restrictions -- These vary widely depending on your city. For instance, some communities have an additional charge for running a consulting business at home. Others limit the number of commercial phone lines a residence can have, or require that commercial cooking and baking be done in commercial kitchens.

How do you deal with this barrage of restrictions? In some cases, zoning regulations may be unenforceable. If a homebased business has been established for a long time, it may be protected by a "grandfather clause" that permits business practices that have been established for years to continue, but restricts any further development of those practices.

Few communities have the funds to send inspectors around to investigate who is violating zoning ordinances. In fact, the only time most inspectors enforce the rules is when they receive a complaint. The golden rule is: The homebased business must be harmonious with the neighborhood. You can't visibly alter your home or do anything to destroy the residential atmosphere. Above all, do not annoy your neighbors. Most homebased business owners have found it's best to keep a low profile. Follow some simple common-sense tips:

1. Use a post-office box number as a business address. This helps you remain inconspicuous, and prevents drop-in customers.

2. Work during acceptable daytime hours. A disturbance at 5 a.m. will quickly draw attention to any business.

3. If an existing building, such as a garage, is used for a purpose other than what it was originally intended for, or if extensive remodeling is required, check your local building and zoning codes carefully before making any changes. Small, homebased businesses occupying only one room in a house usually do not encounter as many problems as businesses that require changing the structure of a home.

4. If local zoning regulations do not allow you to operate a specific type of business in your home, you can petition for an exception to the rule by filing for a zoning variance, a conditional-use permit, or a zone change.

A zoning variance or conditional-use permit grants you the conditional privilege of operating a business on land not zoned for that purpose. The filing fee may exceed $1,000, and it may take 90 days or more to get a decision. Getting a zone change is a lengthier procedure, since it means making a permanent change in the way a particular area is zoned. This involves filing a petition with the city planning commission. The entire process usually takes six months or longer.

Any change in land use -- whether permanent (by zone change) or temporary (by variance or conditional-use permit) -- may require environmental clearance. Local planning or zoning departments determine whether or not a business is exempt from laws affecting the environment. If your business displaces residents or generates a lot of traffic, expect trouble. Some municipalities require any business that affects a natural habitat to prepare an environmental impact report. This can be costly and time-consuming.

Though it may not be apparent to the homebased entrepreneur entangled in red tape, zoning restrictions are intended to benefit everyone in the community. Essentially, business zoning is simply a way of ensuring that a region's land development is sufficiently open to permit light, air, and privacy for everyone living and working in the area. City planners simply want to maintain the proper balance between a growing industrial community and a comfortable residential area.

More from Entrepreneur
Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Use code CAREER2021 through 4/17/21 to save on our collection of recommended career books, including:
  • Career Rehab
  • Entrepreneur Voices on Careers
  • The New Employee Manual
  • And more

Latest on Entrepreneur