Home is where the business is, and it's also where a lot of regulations are. Make sure you're actually allowed to have a business in your home before you start by investigating your zoning ordinances.
Most cities and many counties have zoning ordinances that limit, to one degree or another, whether you can operate a business from home. While many communities have modernized their zoning ordinances to recognize that a computer-based business isn't like a noisy auto body shop, a malodorous hair salon, or a 6 a.m. gathering point for a construction or cleaning crew, many communities ban certain kinds of businesses and prescribe limitations that may handicap some businesses. Here are some common activities communities don't like and may restrict with their zoning codes:
- Increased vehicular traffic, both moving and parked on the street
- Prominent signs
- Employees not related to you who are working in your home
- Use of the home more for business than as a residence (determined by the percentage of space used for the business)
- Selling retail goods to the public-some communities limit this to specific hours
- Storing dangerous amounts or kinds of materials inside or outside your home
Since you're planning to launch your business from home, the first thing to do is check out what commercial activity your city or county allows in your neighborhood. This is becoming easier to do, as many communities are making their codes available on their Web sites. You just need to know what the zoning classification is for your home (that is, R-1, R-2, R-3, etc.), information that is easily found at your city or county zoning office.
While many people blithely ignore zoning, a complaining neighbor can throw a real kink in your business plan, and you may find yourself with a cease and desist order and have to suddenly move or close down. So find out what you're allowed to do, and get along with your neighbors. With their support, you may be able to get a waiver of restrictions, called a variance or conditional use permit.
Also, some people choose to rent a private mail box with a street address to use as their official business address. If you do that, be sure your city doesn't make a physical inspection of the business premises (because they'll be inspecting the wrong location) before granting a city business license.
While you may not have a zoning problem, if you rent or belong to a homeowner or property owners association (which all condominium and co-op owners do), you may encounter even harsher restrictions on operating a homebased business. Homeowner agreements can be harder to change, but these days so many members are themselves working at home, the restrictions are often not enforced. Still, an angry neighbor can cause problems for your homebased business. So find out where you stand, and if you're moving somewhere new, check out the restrictions before signing a lease or a contract.
How to Investigate Your Local Laws
- You can find out what your local zoning laws say about your specific home business by researching online, in your city's library or through your city's chamber of commerce.
- If you can't get a copy through these sources, don't contact city hall directly. Have a friend do it, or call from a telephone other than your home number. (Many direct dial municipal numbers have caller ID.) According to a recent article in a national publication, Tacoma, Washington, has a zoning bounty hunter who tracks down zoning violators and fines them retroactively.
- When you do get in touch with city hall, ask if there's a home occupation ordinance and if you can get a copy. Tell them you're planning to move into their community, and you have a home occupation. Then wait for their response, which will vary from "no businesses allowed" to "we don't have an ordinance." Some towns even say they have an ordinance but they don't enforce it. Don't believe them.
- If you find your homebased business is in violation, you have one of three options: Shut down, go undercover or attempt to have the law changed.
What to Do if Your "Illegal" Homebased Business is Discovered
- Deny it. Require that they get a search warrant and proceed with legal action. They'll either back off, or a very expensive lawsuit-which you'll likely lose-will ensue.
- Admit it. Cease operation until you can obtain a variance. But be aware, variances are costly and seldom given.
- Bring media attention to your plight. Since the media loves stories on the government abuse of average citizens, you might just wiggle your way out of it.
Aiming for Change
If it's illegal to operate a homebased business in your city or county, there's something you can do to change things. Following are some steps you can take to change the zoning laws in your area.
- Establish a committee of homebased business owners willing to stand up and be counted. Get mentally prepared for criticism from every corner and the chance that your business could be shut down.
- Find out what the zoning regulations are in neighboring communities, particularly those similar in character and size to yours. If operating a homebased business is legal in these areas, it could lend credence to your arguments. If no communities in your area have enacted such an ordinance, contact a city with characteristics similar to yours that has even if it's not nearby.
- Contact your zoning department to see if it has received complaints about illegally operated homebased businesses. Depending on your findings, you could use the results to prove that home offices are quiet and don't cause problems or to pinpoint a need to legalize home occupations and free up zoning inspectors to handle more important infractions.
- Do your research. Get local and national statistics on how many entrepreneurs are working from home; describe who they are and what types of businesses they operate. If possible, find out how many people in your community have business licenses, what their average annual sales are, and how much local, state and federal taxes they pay. This will allow you to present data showing homebased business owners as people contributing to the economic foundation of the city. You might also want to highlight anyone who is the only local provider of a particular service.
- Once you've assembled a research arsenal, use this information to build a coalition that will support a home occupation ordinance. This committee should include homebased business owners, major corporations that use the services of homebased consultants, government officials, homeowner's associations, labor unions, the head of the county zoning department and anyone else with a vested interest.
- Remember, your goal is to educate first and then mobilize the community to support homebased entrepreneurs.
Source: Start Your Own Business, Entrepreneur magazine and Biz Start Ups.
Continue on to the next section of our Home Based Legal How-To >> Insure Your Business