Can You Run a Business from Home? [Yes, and Here's What You Need]
Business Startups Soar Over the Past Three Years
Many new businesses that are started each year aspire to be the next billion dollar business. This past year, a record number of businesses were started—5.4 million (20% more than any previous year on record). And while 2022 numbers are a bit lower due to economic headwinds, down 11% compared to the same quarters in 2021, they are still higher than pre-pandemic levels; 23% higher as compared to 2019.
Some of these businesses have numerous employees, while others are run by solopreneurs. Some may start with the assumption that they need a permanent, fixed office space. But many weigh their options and are electing to run their businesses from coworking space, day offices, home offices, or a combination of the above. Permanent office space is expensive and lacks the flexibility small businesses require.
Even with these options, many businesses are still run from home. The U.S. Small Business Administration Office of Advocacy, for example, found that half of small businesses start at home. For entrepreneurs and small businesses that chose to run their businesses from home, what are some of technologies and processes that you need to have in place?
The following are some of the top things an entrepreneur or business need to ensure they have checked off.
Determine If Your Home Is Well-Suited for Your Business
The very first question you need to ask is if your home is well-suited for running your business. In most instances, you need to have a dedicated space or room from which to run the business. Depending on the nature of your business, you need to determine if your home provides adequate privacy and is free from regular disruptions—spouses, kids, dogs, neighbors, and others.
This is just one of a number of questions that you need to pose (and if you have employees, most of these also apply to them):
1. Am I disciplined enough to work from my home?
2. What hours will I work from my home office and how do these align with other activities at home (e.g., when kids come home from school, practice musical instruments, etc.)?
3. Can I separate my work life from my private life?
4. Will suppliers object to bringing products to my home?
5. Will I need any employees to help run the business?
6. Will neighbors have problems or concerns about a business being run out of my home?
7. Are there any zoning restrictions that apply (see below)?
Potential Problems When Using Your Home Address as Your Business Address
When forming a business and renewing state licenses every year, a business must list an address. Using your home address can create in a number of issues:
Privacy of Your Home Is Not Respected
When you use your home address to register your business—or switch the address during your annual renewal process to your home address—your home address is suddenly public (viz., state business registrations are public). As a result, customers and others may show up at your doorstep while you’re having dinner with the family, on a date, spending time with friends and family, and in the middle of the night when you’re asleep. Further, not all of these “home visits” are friendly; some who show up can be mentally ill and are more than a nuisance—they can pose a physical threat.
Heightened Cyber Risk
Now that all of us live in a digital world, the risk of cybercrime is always present. When you use your home address to register and form your business, this information—and the details—also become available to cybercriminals. They can retrieve personally identifiable information (PII) about you and your business and use that information to steal your identity and hack into your accounts.
Violation of Local Zoning and Other Regulations
Use of home addresses for a business are prohibited in some situations. Local ordinances and homeowner/housing regulations (covenants, conditions, and restrictions [CC&Rs]) can prohibit residents from using their home addresses for business purposes. Thus, even if you own your own single family, townhouse, or condominium, you cannot use it as your business address. For renters, the same prohibitions can exist: Condominium and apartment communities have policies in lease agreements that also ban the use of home addresses for business registration.
Degradation of Search Engine Rank
For many businesses, the ability to be found online is critical. Use of home addresses by small businesses and solopreneurs such as e-commerce businesses can have a detrimental impact on their search engine optimization (SEO) rank. Google My Business listings, for example, lower SEO rank for businesses that list their home addresses as their business address.
Loss of Legal Protections
When you form a business, one of the items on the checklist is registration of the business as an LLC or S-Corp. Doing so helps you protect your business from legal and financial risks. It separates your personal assets from your business assets. But a court can determine that business and personal activities are intertwined, and use of a home address for your business is one of the factors that come into consideration. If this occurs, then a business owner can be held personally responsible for legal and financial obligations—debts, penalties, and fines.
Get a Virtual Office Address
Small businesses and entrepreneurs can avoid the above entanglements and challenges by using virtual office addresses like Davinci Virtual Offices. Virtual office addresses give you the ability to find a business address in a professional location that demands great first impressions from customers, prospects, and employees. They also give you the flexibility to change your business address—unlike a permanent office space with a long-term lease—or secure additional business addresses as your business grows and expands into new locations.
With a virtual office address, you get a listing in the lobby directory, mail forwarding and receipt services, and access to coworking space, day offices, and rented meeting rooms. To get started, you need to complete a U.S. Postal 1583 form, have it notarized, and show two forms of ID when doing so. Within two days, you can begin using your new business address and are off and running your new business from home.