People running their startups from home aren’t unheard-of. A lot of employees even have home offices, with the work-from-home setup widely adopted by many employers all around the globe. But if you’re an entrepreneur who plans to start a company from a separate residential property, won’t you be breaking laws?
Perhaps you’re considering an investment home. If you’re not living in it, renting it out would be the best purpose for the property. But you’re not up to the duties of a landlord, so you’d instead use it for your budding startup.
Whether it is legal or not depends on the area. In the U.S., for example, the Department of Labor can restrict home-based work to enforce the minimum wage laws. State laws may also put restrictions on hiring employees and outside contractors if they work out of their homes. Also, there might be zoning regulations.
But if you’re from Australia, the laws are far less strict. Below are overviews of the guidelines you have to follow in setting up a home-based startup:
You can run your business at home, provided that you comply with tax obligations, like any other business. You may need to register for the following:
- Tax file number
- Australian business number
- Goods and services tax
- Pay as you go withholding
- Fringe benefits tax
Licenses and Registrations
The licenses and registrations depend on the area where the home office is and your business structure. But all sites require the registration of your business name and Australian business number. Special permits regarding zoning, signage, noise, and health issues may also apply.
Depending on the nature of your business, you may be subject to any of the following insurances:
- Public liability
- Professional indemnity
- Product liability (If you have clients coming into your home to do business.)
If you own or rent the house, you can deduct property expenses on your tax returns. And if you own the property and sell it in the future, you’ll be required to pay capital gains tax. Also, you may have GST obligations and entitlements.
Because a house is vastly different from an office, finding a suitable area to work in may be difficult. If you’re also living in the house, setting up a work station in the dining room will distract everyone, and you would not likely be productive.
Hence, find a room that you can use solely for work. You can convert the garage, attic, or loft into a home office. Such space will be crucial if you hire employees.
Be sure that you’re up to the task of organising and storing your work material well. You can’t dump essential papers in the kitchen, where they can be mixed up with your household bills. Likewise, you can’t place them in your closet unless you’ve converted the area into a mini home office.
Another reason to create a home office is the equipment. Over time, you’d need a work computer, a printer, a phone, and others. When you begin to hire employees, they’d need their work desks and chairs. So before you even start opening your company, list down all the equipment you’d need so that you can assess whether your space will be sufficient.
Most importantly, wherever you run your business, keep your passion alive. Being at home can distract you a lot, so find a way to focus on your goals. The first few months will be the hardest, with you passing around flyers and brochures to make your business known. But with endurance, perseverance, and patience, your home-based business could turn into a multi-million dollar empire in time.