10 Questions About Starting a Home Business in 2020, Answered
Are you looking to start a home business in 2020? Sick of the uncertainty with your job, or do you have a burning desire to do your own thing and build your own LLC or other business structure? You’re not alone.
Global Workplace Analytics reports that 5 million people work at home, with 80 percent of employees wanting to work remotely. Currently, about 50 percent of businesses are home-based — meaning 15 million home-based businesses operate in the U.S.
There’s no better time than right now to put things in motion to start your own home-based business. Use these questions and answers to help you build the foundation you need and reap the rewards from your hard work and sacrifice.
1. What Kind of Business Can I Start from My Home?
Any business can be started from your home. A home-based business doesn’t mean that the business isn’t “legitimate” or that the business isn’t “viable.” Did you know that Amazon was started out of a home? Jeff Bezos started the company in 1994 and used his garage to build his e-commerce empire.
Some home businesses grow and scale to the point of needing a physical location outside the home, just like Amazon. But others that sell either a product or a service can often operate out of a home office indefinitely.
Knowing the top industries that work from home can guide you in choosing a home-based business that will easily thrive in a home office environment. The Bureau of Labor Statistics found that these 10 industries had the most remote workers:
If you’re still stuck on narrowing down your ideas or want some others to consider, here are 10 home business ideas you can start at home that have an extremely low startup cost.
2. What Type of Business Structure Do I Need?
The type of business structure you need is dependent on the company you are trying to form. If the business will consist of just yourself, you can consider either a sole proprietorship or an LLC.
An LLC is often your best bet as it allows you to keep your personal assets separate from those of the company. This limits your own liability when it comes to company debts and responsibilities. It’s good to have your personal assets separate and secure rather than lumping them all together in a sole proprietorship. If you are thinking about starting an LLC, Incfile can help you launch your business today for $0 + state fees.
Something else to consider is a DBA (Doing Business As) name, also referred to as a fictitious business name. If you want to do business under a different name from your legal business name (once it is formed), many states will require you to prepare and file a DBA.
For instance, if your business name is Sam’s Pet Wash, but you want to create Sam’s Mobile Pet Wash, you can create a DBA rather than a whole new business structure. The process is easy and straightforward and can be quickly completed when using Incfile for your DBA filing.
3. How Do You Choose a Business Name?
Starting a home business is very similar to starting a family. Deciding on a name for your “baby” can be difficult. You want something recognizable and catchy as you build your brand.
Some tips for picking a business name include:
- Make sure it is original and relevant to what you are selling.
- Keep it short — three words or less is often recommended.
- Convey a meaning that positively relates to your brand.
- Ask for feedback from friends and family.
- Use a business name generator tool to spark ideas.
- Check that a domain is available for your desired business name.
Once you have your perfect business name, make sure no one else is currently using it. Incfile’s free Business Name Search tool will tell you if your desired business name is available by searching the business registry of your state. If the name is available, you can immediately claim it and form your business.
4. Where in My House Can I Start a Home-Based Business?
Your space is your space — you get to decide. Many people will use an extra bedroom as an office space to start their home-based business, while others will use their basement or even their garage. A corner of a room can also be designated as your “office.” You could even consider purchasing a tiny home or shed for your backyard.
Here’s what to consider in choosing the best spot for your home office:
- Is the spot free from distractions? If not, how will you focus?
- Is there enough natural light and artificial light to work properly?
- Is the space big enough to fit all of your items: desk, chair, files, printer, etc.?
- Do you feel inspired by the space?
5. How Much Money Do I Need to Start a Home Business?
Many factors go into answering this question. One factor is, what kind of business are you starting? If it’s a service-based business, you may not need much money at all to get started (think along the lines of a social media marketer, an artist or a painter).
If you are selling goods and products, you may need money to purchase inventory and product storage. Do some homework about what products, software, etc. you must have, and then make a running list of your overhead.
In general, you can start a business for a few thousand dollars. You simply need to know what you’re getting into and the costs (and risks) involved. The Small Business Administration offers a Startup Costs Worksheet to help you plan for potential expenses and estimate what you’ll need to spend.
6. When Can I Expect to Start Making Money from My Business?
The hard reality is that it could take you years before your business is profitable. Some estimates say it takes two to three years before a startup can see profit. Unfortunately, most people don’t have three years’ worth of money put aside to pay their bills until they finally make their investment back on their business.
The good news, however, is that thanks to technology and communications lowering the overhead needed to start a business (especially a service-based business), that time frame could be reduced.
7. Should I Get Funding to Start My Home Business?
It is generally considered best to fund a startup yourself.
Mark Cuban, billionaire and investor on Shark Tank, was quoted saying, “Sweat equity is the best startup capital. The minute you ask for money, you are playing in their game — they aren’t playing in yours, you are at a huge disadvantage. The minute you take money, the leverage completely flips to the investor. They control the destiny of your dreams, not you. Investors don’t care about your dreams and goals. Investors care about how they are going to get their money back and then some.”
If raising capital is your only option, consider asking family members to help you get your business off of the ground before getting a bank loan or investors. The bank will charge you hefty interest rates and an investor could do the same and/or ask for a percentage of your company.
If you still want to pursue a bank loan, the U.S. Small Business Administration can match you with a lender. The SBA works to reduce risk for both parties and therefore helps enable easier access to capital.
8. If I Have a Home-Based Business, I Get to Write Off My Home, Right?
No, not exactly. Just because you are operating a business under the roof where you also lay your head doesn’t mean you can kiss your mortgage payments or rent goodbye. The only part of your home you can write off on your taxes is the area you actually use for your business.
For instance, if you are using a spare bedroom and the space is 5% of your home’s total square footage, that is the amount you may deduct from your taxes. Therefore, 5% of your utilities, property taxes, rent/mortgage payment, etc. may be deducted.
9. Where Do I Begin When Trying to Start a Business?
Many times it is wise to partner with a company that can help you with all the ins and outs of starting a business. Incfile exists to help entrepreneurs through the process. Check out some of our checklists, guides and tools to help you get started with your home-based business.
- Business Startup Guides
- Complete Guide to Starting a Business
- Start a Business Checklist
- Research Tools
- Free Business Downloads and Tools
10. What If I Fail?
But what if you don’t? The thought of failure crosses everyone’s mind. If you don’t at least try, the result is the same.
However, be sure to prepare yourself for potential failure and see it as a learning opportunity. According to Fundera, around 20 percent of businesses will fail in their first year, about 50 percent will fail by their fifth year and 70 percent will fail by their tenth year. This shows that you need to be very specific with how you will start, operate and grow your business.
No matter what the statistics show, Incfile can help you get your business started. We’ve helped form 250,000 businesses since 2004, and we can be your trusted partner to guide you through every step of starting and growing your home-based business.