Monday, February 10, 2014

Can a Home Office Actually Cause Legal Problems for the Homeowner?

One very misunderstood situation for many homeowners is what exactly is required by law if they have an office in their home. There are many people with home offices that simply don’t bother to do any research; they feel that what they do in their own home is their own business. While I personally agree with them the truth is that many factors need to be considered when turning a part of your home into a business venture. Failure to meet local and state ordinances can result in fines and in some case possible prison sentences.

The first thing to check out when considering a home office is the zoning laws in your area. Many residential areas are not zoned for any type of business venture within the home and such activity is strictly prohibited. Areas that do allow such activities usually have very strict laws governing exactly what it is that you can or cannot do in regards to a home based office or business.

The reasons for these ordinances include problems associated with increased vehicle traffic resulting in too few parking spaces for residences, increased foot traffic which theoretically could bring “undesirables” into the neighborhood as well as violations of health and safety regulations as pertaining to commercial buildings. The maximum number of persons allowed in any structure as mandated by local fire code is also a possible concern.

The real question here is exactly what type of business related activity do you intend to do in your home and how does it affect your neighbors and the surrounding community? It’s been my experience that most home businesses that consist of nothing more than working on a computer attract little to no attention to themselves but anything more than that can bring a slew of local inspectors (and nosy neighbors) into the picture.

As with any business endeavor it’s always wise to check with an attorney and accountant before starting but here are some other points to consider if a home based business is something that you are considering. You should also check with your local clerk’s office for the city or county to determine if you require any licenses or permits. Possibilities include:

  •  A retail sales tax license in states where there is a sales tax and you need to add it to your customer’s purchase amount. This is usually only required if you intend to buy products from a wholesaler.

  • You will need a food permit usually issued by the local health department if you either sell or make any type of edible product.

  • As mentioned above you might need to obtain a zoning permit from your local planning department or zoning board.

  • Some states require a special license for certain types of businesses run from the home, especially day care centers. Don’t fool with this one, an unlicensed daycare is an unregulated daycare and the authorities do not make exceptions to this type of situation.

  • Finally it may be necessary (or wise) to obtain an FEIN (Federal Employers Identification Number) from the IRS and don’t forget that most homeowner insurance policies do NOT cover any type of home business.

There may be other legal factors to consider as well and there is no sense in risking the biggest investment most of us will ever have, our homes. This is one time where an ounce of prevention is truly worth a pound of cure so if you are considering (or already have) a home based office a little research might be well worth your time.

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