Home-Based Business = Self-Sufficient Income
Prepping is about self-sufficiency. That being so, many argue that one of the most important steps towards personal freedom — that is, the ability to survive and thrive without relying upon others — is owning a business. (As you’re reading this, some of you are thinking that you don’t have any talent or skills that are economically viable, especially marketable enough to support yourself and a family. Check out this and this for help.) In order to do so, there are some legal principles you should know. As always, this post is not intended to be legal advice or counsel; always consult a qualified attorney for questions and planning.
1. Choose Your Form of Business
A sole proprietorship is a one-person business. In other words, there’s no separation between the business and its owner. In fact, you don’t even do any filings with your state; you are a sole proprietor simply by running your business. There are several benefits of sole proprietorship: first, there’s the pass-through tax advantage; second, the owner receives all of the profits. On the other hand, the most significant disadvantage of a sole proprietorship is that the business owner is not immune from liabilities incurred by the business.
Even though starting a sole proprietorship is not that complicated, you should still check to make sure whether there are any local registration, permit, and licensing requirements. You will also have income tax obligations (filing a Schedule C with your Form 1040).
Oftentimes, if the business becomes profitable, the owner will reestablish the company as a limited liability company (LLC) or an S-corporation.
An Example of a Sole Proprietorship
In 2012, Hugh Braek started his company, ACME Survival Rations, as a sole proprietor. The company creates and sells survival food packages, and he began as a local vendor in Hugh’s town of Kalispell, Montana. The sole proprietorship first sold its survival packs at local farmer’s markets; and then, after significant word-of-mouth-based sales, it expanded to an e-commerce business that even received orders from overseas.
In a short amount of time, ACME expanded its business to service nationally and even international customers. As a result, Hugh restructured the business from a sole proprietorship into an LLC. If the business keeps growing, he will probably seek to incorporate in order to secure some investors.
Limited Liability Company (LLC)
If you want to limit your personal liability or if you have a business partner, you might want to consider forming a limited liability company (LLC). There are several basic steps:
- Check to see if your company name is available for use. If not, consider choosing something else.
- You need to draft articles of organization and file them with your state business bureau.
- Create an LLC operating agreement, which outlines your company’s business structure.
- Apply for your employment identification number (EIN) from the Internal Revenue Service (IRS).
There are plenty of online resources, including DIY forms, that can help you get started.
2. Get Your Business License
If you’re required to file a Schedule C or other tax form for reporting your business income, you’ll likely be required to get a business license. You can likely apply and pay for the license on your city or county’s website.
3. Choose a Business Name and Protect It
Before you use a business name (even if it’s your own name), you must find out if the name is already in use or if it’s protected by a trademark or service mark. Not doing so could result in costly legal disputes. You also want to choose a name that’s different so you don’t confuse customers or separate yourself as different from the competition. You can search for business names at www.infospace.com and www.swithboard.com.
4. Know the Details
Zoning and Homeowner and Condominium Restrictions. Most cities and counties have zoning restrictions, and many homeowner and condominium associations restrict the use of property for any activity that generates income.
Contracts and Written Agreements. Familiarize yourself with the art of the contract and written agreements. You will likely develop written contracts for clients and written agreements if you work with partners or subcontractors.
eCommece Business. If you are doing an e-commerce site, it is important to know the important legal issues regarding website development.
Licensing Content. Be sure to know the procedures and rules about content licensing so you can avoid licensing related problems.
5. Consult An Attorney When You Need Help!
Remember, always consult an attorney if there are any risks or uncertainties or if you encounter any legal problems. Obviously, you’ll need help beyond this post to launch your home business. There are many, many online DIY forms, but you must be sure that your paperwork is drafted correctly to meet your business needs as well as any applicable state laws.
Starting a home business is a major step to self-sufficiency. It can also be extremely fulfilling. Perhaps you’ve had that long ago dream of teaching soap-making lessons or doing small-engine repair. Or perhaps you have a skill or talent that you didn’t realize would be marketable. No matter what, always keep a plan in mind as to how you’d earn income WTSHTF. If you have any uncertainty, you should consider starting a home business, even if it’s just a small gig on the side at first.