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Know the Law

Understanding zoning and other restrictions before you start your business will save you big headaches (and money) later.

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Q: My husband is retired, and I would like to be at home. I have a dream to have a small country home with a large building behind, including gardens and a gazebo. I would like to allow small groups to use the building space and also provide a location for small weddings of 50 to 75, inside or in the garden. As a package deal, I would provide handmade wedding items and decorations. I would only do this part time. I have found a country wooded lot. Where do I go to check on restrictions/zoning? Should I do this before or after I buy the lot? Could I offer this service on a "donation fee" and not have to worry about zoning? Also, what are the restrictions on selling out of the home?

A: If you're serious about starting this business, you should absolutely check on any legal, tax and insurance matters before buying the lot. Even if you're only going to offer this service part time, you have to be in line with all the laws and regulations for your area. Many cities prohibit the use of your home for business purposes--and even some state and federal laws and homeowners associations limit the business use of the home. So, yes, do your homework.

To find out about zoning restrictions, contact your city or county government. Find out, first of all, whether there are any zoning restrictions in your area. If there are, make sure you talk to someone well-versed in the intricacies of zoning restrictions, which can be complex, to say the least. Keep the following general questions in mind as you investigate restrictions in your area:

  • How is my property zoned--as residential, commercial, industrial or agricultural? Based on that, what are the specific limitations?
  • Are there restrictions on vehicular traffic or parking?
  • Are there restrictions on the use of outdoor signs?
  • What are the restrictions on having employees and customers on the premises?
  • Am I allowed to sell items on the premises?
  • Are there restrictions on indoor or outdoor storage of materials?

Many people who operate homebased businesses simply ignore zoning laws, figuring no one will know anyway. Sometimes, they're right. But for someone like you, whose business will be noticeable to neighbors and will need to account for on-site employees and customers, it would be difficult, if not impossible, to operate your business without anyone noticing. Even if you did offer your services on a donation-only basis, in effect making yourself a nonprofit, you still have to investigate the restrictions on using your home for business purposes. Always take whatever preventive steps you can to avoid problems.

You'll also need to find out about needed licenses and permits, if any. This, too, varies from city to city and state to state, and it also depends on your type of business. Consult an attorney who can spell out the legal form of business you want to take (sole proprietorship, partnership or corporation), advise you on regulations affecting your business and assist you in filing for the needed licenses and permits, advise you on required insurance, review any legal documents with you, and more. Consider this an investment--the money you spend on legal counsel far outweighs the cost of lawsuits or citations.

Finally, when all is said and done, contact your local chamber of commerce. They can refer you to many helpful resources and assist you in establishing your business, and they often can advise you of local zoning laws and other restrictions. I hope your dream becomes a reality--this sounds like a place I would enjoy visiting!

Karen E. Spaeder is editor of Entrepreneur.com and managing editor of Entrepreneur magazine.

The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

Written By

Karen E. Spaeder is a freelance business writer in Southern California.