According to an article by Ben Casselman, NYTimes.com dated August 21, 2021, “The coronavirus pandemic appears to have unleashed a tidal wave of entrepreneurial activity.”
This notion is supported by the United States Census Bureau, Business Formation Statistics, in that business applications in 2021 were up over 20% since December 31, 2020. Granted, not all business applications turn into successful thriving businesses, but it supports a potential realignment in business activity.
As a result of the pandemic, lifestyles have changed dramatically, leading to more entrepreneurial endeavors such as: personal shopping, blogging, online tutoring and fitness, pharmacy delivery, custom baking and crafts, interior design, just to name a few.
The expectation is that small businesses will continue to grow, and the majority of entrepreneurs will continue to start their businesses in their homes. So, if you have that entrepreneurial spirit, the following is a list of considerations for creating a home-based startup business:
Considerations for Creating a Home-based Startup Business
- Develop a winning idea – Consider your talents and an area of marketplace need. Think about things that frustrate you and what would solve the frustration or consider the marketplace and gaps upon which you could improve.
- Create a business plan – A business plan will assist in defining your business and can be used for potential investors, should you go that route. An excellent resource when writing a business plan comes from the U.S. Small Business Administration. This information can be found at https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan.
- Decide on your business’s name and legal structure – Select a name that is memorable and fits the product or service you are providing. You will have to make sure that the name is not already in use by checking the secretary of state’s website or business bureau’s website in the state in which the business is formed.
As for legal structure, you should consult legal counsel and/or a tax advisor for guidance. The type of entity, be it a sole proprietor, limited liability company, corporation or partnership, all have varying risks, tax implications and filing requirements that should be considered. - Apply for an Employer Identification Number (EIN) – If you plan to register your business or hire employees, you will need an EIN. In addition, the EIN protects you from using your own Social Security number. An EIN is free, can be applied for on the IRS website, and received within minutes.
- Establish a business bank account for your entity – This will separate your personal finances from the business’s finances and will assist in maintaining an accurate set of accounting books and records.
- Explore the necessity of business licenses and permits – Depending on your location, you may be required to obtain a permit for your home-based business. In addition, various licenses and permits need to be considered such as: a business operating license, professional or trade license, sales tax permit or sales tax exemption certificate.
- Consider obtaining insurance – Insurance will mitigate the exposure to such risks as personal injury, property damage, potential lawsuits, data breaches or business interruption.
- Hire an accountant – An accountant can assist you with the business structure, business setup, bookkeeping, and accounting, taxes and payroll, if necessary.
- Set up a home office – Studies have shown that it is important to designate a specific home office space in order to be successful at working from home. This promotes productivity and helps separate work from personal life. Be sure and invest in appropriate furniture and technology to promote a strong work environment.
- Develop a marketing plan – A marketing plan includes your market goals, target market, a timeline and metrics for measuring success.
There are opportunities abound; so, if you have a business-worthy idea, consider the next steps in starting your own business. If you would like to learn more about how to plan for, launch, and run a successful business, please contact a Schneider Downs advisor.
