According to research by GEM, 69% of entrepreneurs in the United States begin their businesses at home. Since this study was done before the COVID-19 pandemic, it’s likely that even more people are starting businesses from home today.
Even without the impact of COVID-19 and stay-at-home rules, it’s easy to see why many people choose to work from home when starting a business.
Working from home is free, easy, and some people find they get more done at home than in an office.
And since 86% of business activity in the U.S. is driven by opportunity, it’s clear why these benefits appeal to many new business owners.
But even though running a business from your home may seem simple, it still comes with challenges.
Money is one of the biggest factors when starting a home-based business.
According to a Wells Fargo-Gallup poll, 77% of new businesses use personal savings to get started. This can be a good way to launch your business, but building business credit early on can help you gain financial benefits in the long run.
You’ll also need to decide if you’re truly going to “start a business,” such as by registering an LLC, or if a simpler setup like remote work or a sole proprietorship fits your plans better.
No matter what you decide, there are many things to think about, and this article looks at several of them.
Starting a Business vs. Remote Work
There’s a lot of confusion around what it means to work from home or start a business, so it helps to define the terms clearly.
Remote Work / Telecommuting / E-commuting
After the COVID-19 pandemic began, many people became familiar with terms like “remote work” and “telecommuting.”
But what do these terms actually mean?
Telecommuting is when someone works outside a traditional office—usually from home, a coffee shop, or a shared workspace—and communicates with their team by phone or online tools like email or Slack.
The important thing to remember is that a remote worker is still an employee. They are not self-employed or running a business. If you want to work from home but stay employed by a company, telecommuting may be right for you.
Remote work is now very common. During the pandemic, many companies moved to remote or hybrid work setups. Today, you can find many remote job listings on websites like FlexJobs, Remote.co, and Working Nomads.
Sole Proprietorship
A sole proprietorship is common for freelancers. This type of business is run by one person and is easy to set up. However, the downside is that the owner is personally responsible for all business debts. It can also be hard to get funding because there is no legal structure to protect lenders.
Partnership
A partnership is like a sole proprietorship but includes two or more people. Each partner helps fund the business, shares the profits, and is equally responsible if something goes wrong. Like sole proprietorships, partnerships do not offer legal protection for personal assets.
Limited Liability Company (LLC)
An LLC is the most popular type of legal business structure. It helps protect the owner’s personal property from business debts. As long as the rules are followed, the business is treated as its own legal entity, separate from its owner.
As your business grows, you may later decide to take another step and turn it into a corporation.
Key Steps to Take When Starting Your Business
If you choose to register your business as an LLC, there are several important steps to follow. These steps also apply to sole proprietors.
Get a Business License
After setting up your business, you’ll need a business license. This license allows you to operate legally in a specific location and is issued by a government office.
There are federal and local licenses. The one you need depends on the type of business you plan to run, so it’s important to research which one applies to you.
Establish Business Credit
It’s important to build business credit separate from your personal credit history. To do this, your business must be registered as an LLC or corporation.
Steps include getting a federal tax ID number, using a business address and phone number, opening a business bank account, and getting a business credit card.
Build Your Reputation
A strong relationship with your customers is essential for growing your business and attracting good workers. A good reputation takes time, but there are ways to get started.
Be honest, follow through on promises, and admit when mistakes are made. These actions help build trust. You should also build a strong online presence by asking happy customers for reviews. At the same time, make sure your business looks professional from the outside.
Get a Virtual Office
A virtual office gives you a real business address and phone number to use on your website, business cards, and other marketing materials.
This looks better than using your home address and helps with both security and marketing. It also helps your business appear more professional right away.
Common Challenges of Working from Home
Working from home comes with its own set of problems. Without coworkers nearby, it can be harder to stay motivated.
You may feel isolated or find it difficult to keep work separate from your personal life. Distractions from family, pets, and household duties can also get in the way. Training might be harder to get as well.
Another issue is not having a good place for meetings. While coffee shops are an option, they often lack privacy and can be noisy.
This is where a virtual office helps. Besides giving you a professional address, many virtual offices also offer hourly meeting rooms or temporary office space.
Virtual offices are helpful if you have a remote team. While technology makes it easier to work with people in different places, face-to-face interaction is still important. A virtual office lets you schedule in-person team meetings and training sessions as needed.
Conclusion
We hope this article has helped you understand what’s involved in starting a business from home. Whether you decide to work remotely for a company or start your own business, you’ll be joining millions of people around the world who work from home every day.
