Many get mystified at this. They end up thinking it’s harder than actually getting a job. Maybe you think you need a wealth of capital for a startup, plus a brick-and-mortar for a land base or headquarters, but that’s not the norm these days.
The truth is, the SBA lays it out there: more than 31 million small businesses exist in the U.S. today. Half of them are home-based. Let that sink in.
It should tell you it’s a sleeper hit to start a business in your PJs!
Pun intended, of course.
Now we don’t mean to make it sound easier than it is, because you’ll still be prepping a lot to get your home-based business off the ground. But — and that’s a big but — it’s a lot easier than you think.
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#1 Write up a simple business plan
You won’t need an attorney or anything to do this. A “business plan” is nothing more than a “road map” of how your business will operate. It’ll lay out —
- What your services or products will be
- What your prospective customers will be
- What revenue you expect to make (financial projections)
- And an executive overall summary
Yes, it can sound a bit like mumbo jumbo; but to make it simpler, your business plan will sort of be like your company’s “resume.” Your customers? They’ll be the hiring managers. Only this “resume,” you won’t ever be sending out.
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#2 Choose the right business structure
There are four types:
- Sole proprietor
- LLC
- Partnership
- Corporation
To make it easy, if you’re the only employee (and CEO, and bookkeeper, and everything else), you’re probably a sole proprietor. LLCs (limited liability companies), however, separate you from the actual business to ensure you’re protected (in the event customers want to complain).
But if you’re not the only person — as in, maybe there are two of you — chances are good a partnership is your game. And lastly, if you want to run a “corporation,” you’ll need a group of “shareholders” who’d want a stake in your business. If you don’t have “shareholders” at all, you might want to go with numbers 1, 2 or 3 — depending on your situation.
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#3: Open a business bank account
Just about every bank or credit union has this option. You only need to walk through the door of one, sit down with someone, and discuss the options.
“But why not use my own bank account?”
A wonderful question, actually. Simple.
The fact is you are not your business. For tax purposes, you will benefit by being separate from your business. Your business taxes will be better off as separate from your taxes.
And best of all…. If your business faces a lawsuit…. You won’t face the lawsuit.
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#4: Get an accountant
Surprisingly, this is easier than you think, too. Especially if you’re basically friends with said accountant. And it may apply to whether or not you want to make your business a partnership (or LLC). Because your accountant not only can manage the business taxes, but also have a stake in the business and even own it with you.
More importantly, taxes are just plain confusing! So getting an accountant’s invaluable — especially if you expect to owe more than $1,000 (it means you’ll have to pay taxes quarterly — and an accountant will help you with that).
Who knows — you might even get to have your spouse do all that financial work for you.
Understand that it’ll be touch and go from here on out
And that’s okay. Running a home-based business is basically experimentation. You’re a corporate scientist. At the point of completing those four steps, you’re set to start selling, and by then you’ll be able to gauge whether or not there’s a demand, audience or customer base for you.
The easiest part is gauging profitability. If you’ve invested two bucks and found you’ve made four, then guess what: your home-based business might work out quite well! And you should definitely not sleep on it (but wear PJs, for sure).
