There's no place like home when it comes to small business. In fact, the U.S. Small Business Administration has found that around half of all small businesses start from home, sweet home. If you're preparing to launch an LLC and wondering if running your business from your house, condo, or apartment makes sense, you're in good company.
But you might be wondering if it's really the best choice for you. Here, we'll look at the ups and downs of running an LLC from home and what you need to consider before you get started.
Pros of Running an LLC From Home
Who doesn't want to roll out of bed, pour a cup of coffee, and start their workday in their pajama pants? While that's not exactly a realistic depiction of running a business from home, there are still plenty of upsides. Let's take a look.
Running an LLC out of your home can cost less than running a small business anywhere else. You'll reduce lots of overhead — you don't have to worry about leasing or renting office space, maintaining a vehicle, making a daily commute, or furnishing, heating, and cooling an office space. With all those savings, you can invest in creating a comfortable virtual office in your home, allowing you to put your money into your growing business.
You'll need to brush up on filing taxes for an LLC no matter where you operate your business, but you can also take advantage of some key savings if you run your LLC from home. Primarily, you may be eligible for a home office deduction if you operate solely from home.
Keep in mind that the space you work in must be used exclusively for the business — you can't claim the kitchen as your office because you work from the table or your bedroom because you squeezed a desk into the corner. It must be an area dedicated to business operations.
There are additional tax deductions for LLC owners operating from home, including:
Homeowners and mortgage insurance
A portion of utilities and cleaning fees
Repairs made directly to the office space or a portion of repairs made to the entire home
Use of your car for business purposes
Remember that you must meet the criteria set by the IRS to qualify for any of the above deductions. For a complete list and to calculate your possible LLC tax deductions, check with the U.S. Chamber of Commerce home office deduction guidelines.
When you're just steps away from the office, your morning and afternoon commute becomes a lot more bearable. In fact, convenience is a major perk for business owners with home-based businesses.
Skipping that daily commute can save you both time and money that would be spent on gas, car maintenance, and parking. As a bonus, working from home is far better for the environment and can help reduce your carbon footprint.
The lifestyle benefits of running a business from home go hand-in-hand with convenience. When you operate out of your home, you have more control of your schedule. That means, depending on your industry and hours of operation, you can work when it works for you, giving you more time to spend with family and friends, run errands, or catch up on some rest. It's much easier to enjoy a long lunch when you don't have to drive to work, and you can make health a top priority when your gym is just down the hall.
Cons of Running an LLC From Home
Of course, for every ray of sunshine, there's a little raincloud just waiting to ruin the fun. However, it should be noted that the downsides of running an LLC from home are, for the most part, easy to overcome. We'll offer solutions here so you can focus on the positives and quickly eliminate those negatives.
When your work address and your home address are the same, you put your personal info on the line. That means an angry vendor or upset customer could easily find out where you live, or a scammer could use your personal details to defraud you or steal your identity.
The solution? A virtual address. Use a Virtual Address service to secure a street address in your state, which you can use for all your business purposes. That's the address that will be registered for your LLC and the one where you'll receive all your mail.
In fact, that mail will be opened, scanned, and emailed to you, so you can check it from anywhere in the world. You can have important documents forwarded to you, and the rest will be securely shredded and disposed of.
Permits and Zoning
You may need special licenses and permits to run your business out of your home, depending on your industry and location. You may also need to have your home zoned for business purposes, especially if you're going to serve customers in the same space.
It's best to check local, state, and federal requirements before getting started. You can also use our Business License Research Package to find out exactly what you need to stay compliant.
Separation of Work and Personal Life
It's easy to muddy the waters between personal and professional when you run your business from home. It takes extra effort to maintain a work-life balance and ensure you aren't "always on." A good way to start is by separating work and personal finances — one of the key components of running a successful small business.
Having a dedicated business bank account and credit card will help you be mindful about spending for you or for the business, and it will draw a real separation between the two. This mindset will carry over into how you view your business and your personal life.
There are a million distractions lurking around your home — from the obvious (TV, social media, fully-stocked fridge, etc.) to the not-so-obvious (an unexpected visit from a neighbor, a storm that takes out the power, and so on). It can be tough to focus when life is going on all around you.
Working in the company of others can be helpful to some, which makes getting work done at home extremely difficult. If you're someone who enjoys being around other people, you can look into joining a coworking space or shared office space, or you can explore tools that let you work virtually with another person for accountability.
What's Needed to Run an LLC From Home?
What you need to run your LLC from home really depends on the nature of your business, but there are some considerations you'll need to make if you want to make a home-based business a success. Here's some of what you'll need to get started:
Good Wi-Fi. You want to have access to reliable, high-speed internet from your home. Be sure to consider all the other devices using Wi-Fi in your home, as this can impact your overall speed.
Phone service. Most home-based businesses can get away with using a mobile phone when needed, but if you're spending a lot of time on phone calls or dealing with customer service, you may want to explore a virtual phone service.
A street address. You'll be asked for a street address during your LLC formation process. As mentioned above, you may not want to use your home address in order to protect your privacy. A virtual mailbox can give you a street address in your state that keeps your actual location protected.
Office supplies. You don't want to run out every time you're out of staples or need to print a document. Make sure you're covered for all scenarios, and stock up on supplies, both small and large. Wireless printers, backup chargers, extension cords, and USB ports are all great to have on hand.
A Registered Agent. A Registered Agent is an individual who receives important legal documents on behalf of your business. While you can act as your own Registered Agent, it's not always the best choice for home-based businesses. If you were to be served legal papers, it would happen at your home, disturbing your privacy and creating a potentially uncomfortable situation. A Registered Agent service provides you with an agent in your state and ensures your documents are always safely received. When you start your business with Incfile, your Registered Agent service is free for the first year.
Frequently Asked Questions About Home-Based LLCs
If you still have questions about running an LLC from home, we've got the answers you need.
What Is the Best Address to Use for an LLC?
The best address to use for an LLC is typically not your home address. Even if you work from home, you don't want that information to be public knowledge. However, you can't form an LLC with a P.O. box, so how do you keep things anonymous while still meeting the business formation requirements?
A virtual address service is your best bet. A virtual address, often called a virtual mailbox, provides a street address in your state, which you can then use to form your LLC. Keep in mind this is not an actual address where you go to collect mail — your mail is received, scanned, and sent to you digitally. It's a great way to protect your privacy and simplify mail management.
What Address Do You Use for Your Company?
The address you use for your company should be the same address under which you registered your LLC. However, if you register under your home address and decide later you want to use a virtual address, you can still make the change. You file Articles of Amendment for your LLC, and then you can begin using your virtual address.
Do I Need an LLC for a Home-Based Business?
You do not need an LLC for a home-based business, though it is recommended for many business owners and entrepreneurs. It's often the most popular choice due to its flexibility and cost-effectiveness.
However, you can begin operating your home business without a legal entity — in this case, you would be a sole proprietor. It's the fastest way to get started running your business, but keep in mind that it doesn't come with any of the liability protection of an LLC, and it doesn't give your business any of the legitimacy or other perks of having a legal structure.
Can You Use the Same Address for More Than One LLC?
Yes, you can use the same address for more than one LLC. If you plan to form more than one LLC, keep in mind that you'll need to create new Articles of Organization for each one. In addition, each LLC must have a unique business name — however, as the owner, you are allowed to be listed on each one, and all of them can use the same Registered Agent and address.
There's No Place Like Home for Your Business
Running an LLC from home is a great choice for many small business owners. It can lower costs and provide a lot of benefits you won't find when you start your business somewhere else. When it comes time to get your home-based business off the ground, get a headstart with Incfile. We've formed over 1 million businesses, and we can take care of all your needs, including your virtual address, Registered Agent, and much more.
Wendi is a freelance writer based in Indianapolis, IN, with over a decade of experience writing for a variety of industries from healthcare to manufacturing to nonprofit. When she isn't working on solutions for her clients, she can be found spending time with her kids and husband, working in the garden or doing more writing (of the fiction variety).