1. Starting A Small Business: Introduction
  2. Starting A Small Business: Choosing Your Business
  3. Starting A Small Business: Financing Your Business
  4. Starting A Small Business: Business Structures
  5. Starting A Small Business: Making The Leap
  6. Starting A Small Business: Location And Licenses
  7. Starting A Small Business: Hiring Employees
  8. Starting A Small Business: Taxes
  9. Starting A Small Business: Record Keeping
  10. Starting A Small Business: Conclusion

The type of business you’re starting, the laws in your jurisdiction, what you can afford and what suits your lifestyle will determine the options for your business location.

Home Office

For many new small business owners, a home office makes the most sense. Most cities and towns will allow you to run a business out of your home as long as you meet certain criteria. Here are some examples of business situations where your city may not allow you to run your business from your home:

  • Clients or customers will be visiting your home
  • The business will be located in your garage
  • You want to manufacture a product on your premises
  • You want to repair vehicles on your premises
  • You will have one or more employees
  • The business will create a noise disturbance
  • The business will occupy a large percentage of your home

If you are a renter, you may have additional hurdles to jump through with your landlord.

A major benefit of using your home as your business location is that you won’t waste any time commuting and you won’t incur additional costs to rent an office space. The IRS also offers significant tax deductions for a home office used exclusively for your business. Not only is the cost of the space deductible, but so are the utilities, furniture and improvements associated with that space.

A major drawback of working from home is that you can never truly leave work. Also, many types of businesses aren’t suited to a home location. (Learn how having a good work area can contribute to your success in Creating A Home Business Work Space.)

Storefront

A storefront gives you more than just a place to do business. With the right location and signage, it’s also a form of advertising. If you’re in the cupcake business, for example, you will likely have more customers if you sell cupcakes from a visible storefront rather than solely providing them for catered events — but you’ll have to determine whether the costs and extra work of running a store provide enough payoff.

Running the store might detract from your catering work, or it might enhance it by bringing you more foot traffic and more potential catering customers. But you’ll have additional costs from renting the space, paying utilities, securing additional permits and licenses, dealing with the health department and hiring employees to help you attend to customers.

A storefront can also make sense for someone selling a service. But again, you must be able to afford the extra expense. That being said, business space that you buy or rent outside your home is tax deductible, too. (For ideas, see Starting Your Own Business In New York City.)

Office Building

If you provide a professional service like consulting, renting a space in an office building might make sense. It will allow clients to come to your office instead of you always having to go to them, and working outside the home means a greater separation between your work and home lives. Although you will spend some time commuting, working outside your home also gives you more opportunities to meet people and network, especially in a coworking space. In fact, coworking gives you the option to work out of an office on an as-needed basis, which may cost less than renting an office full time.

Permits, Licenses and Business Registration
There are both federal and local requirements for business permits, licenses and registration. The requirements depend on what your business does and where it is located.

The only types of businesses that require a federal license are ones that fall under the supervision and regulations of a federal agency. Some of these types of business are listed below:

  • Aviation
  • Investment advising
  • Drug manufacturing
  • Preparation of meat products
  • Fish and wildlife
  • Mining and drilling
  • Nuclear energy
  • Radio and television broadcasting
  • Ground transportation
  • Selling alcohol, tobacco or firearms

These lines of business will also generally require special state licenses.

Your state and/or city will probably require you to have a business tax certificate. Depending on your line of work, you may need a state occupational license. Doctors, attorneys, real estate agents, insurance salesman and hairdressers — among others — commonly need an occupational license, and an occupation that requires a license in one state may not in another, which could affect the line of work you go into or where you decide to operate. If you want your business to sell liquor, lottery tickets, gasoline or firearms, you may need a special state license.

If your business will operate under a fictitious name, you will probably need a “doing business as” or DBA permit; laws vary by state. You may need to conduct a name search to make sure the business name is available in your state and publish notice of your DBA in a local newspaper if your county requires it. You’ll also need to complete and file an application with the appropriate government offices depending on what’s required where you operate and what level of legal protection you seek for your business name.

Certain businesses, such as manufacturing, require zoning and land use permits. Nightclubs and bars may require fire permits. If you’ll be selling taxable merchandise, you’ll need a sales tax license or seller’s permit. If you’ll be preparing or selling food, you’ll likely need a health department permit.

And yes, almost all of these permits and licenses cost money. Some are flat fees and some are based on your business income, also known as gross receipts. The websites for your state and local government are a good place to find information on the permits, licenses and registration requirements to open and operate your small business. Calling your city hall is another good place to start. (Learn more in The Licenses And Permits You Need For Your Home-Based Business.)

(Source: sba.gov)

Employer Identification Number (EIN)
You will need to apply with the IRS for an employer identification number (EIN), which is a type of a taxpayer identification number, if your business: (Sources: https://www.irs.gov/individuals/international-taxpayers/taxpayer-identification-numbers-tin, https://www.irs.gov/businesses/small-businesses-self-employed/employer-i...)

  • Is a corporation or partnership
  • Has employees
  • Files employment, excise, alcohol, firearm or tobacco tax returns
  • Withholds taxes on income, other than wages, for a nonresident alien
  • Has a Keogh plan
  • Is involved with any of the following types of organizations:
    • Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
    • Estates
    • Real estate mortgage investment conduits
    • Non-profit organizations
    • Farmer’ cooperatives
    • Plan administrators

Your state may also require you to get a state tax identification number if your state has an income tax.

Next, we’ll discuss whether you should hire employees for your new business. 


Starting A Small Business: Hiring Employees
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