Home-Based Business? Here’s What You Need to Know

Galia Aharoni Schmidt, Esq.

Now more than ever, people are starting businesses from their homes. Here are some things to know about starting a California home-based business to protect yourself and set your business up for success.

First, make sure it’s allowed

Some HOAs, leases, or deeds restrict your ability to start a business from your home. Check this first.

You still need a local business license

Even if you’re just a casual sole proprietorship, if you’re doing business, you’re required to get a local business license in the city or county your business is located. If you’re working out of your home, that means you need a business license in your home city. To find out how, do a web search for “business license [your city]” and your local government office, usually the city clerk, should pop up with more information. Occasionally, a city will not require a local permit, but this is rare, so make sure to double check!

You’ll need to pass a zoning clearance

As part of your business license, the city will verify that you’re allowed to run your type of business at your address based on your home’s zoning category. Most of the time, if your business will not have customers on the premises, you will likely have no problem getting zoning clearance. However, depending on your home’s zoning category and the type of business you’re running, the city might not want to give you permission to do business there. If you do not pass the zoning clearance, consider talking to a lawyer to see if they can help.

Your address might be public record

If you’re starting an entity like an LLC or corporation, the formation documents you file with the Secretary of State are public record. This means if someone looks up your business’s paperwork, they’ll be able to see your home address. To make matters more difficult, the Secretary of State prohibits the use of PO Boxes for business headquarters addresses. If you, like many people, aren’t comfortable having your address be public record, you might need to get an alternative address such as a compliant digital mailbox or a coworking space. This, of course, adds cost, so it’s up to you whether that extra expense is worth it.

If you’re an entity like a sole proprietorship or a general partnership, you don’t have to file public records with the Secretary of State, so it’s easier to avoid this problem. However, other documents or licenses may still make your address public, so keep this in mind when you’re choosing whether to use your home address as your official business address.

You may need additional permits or licenses

Depending on the type of business, you may need additional permits or licenses. For example, if you’re starting a home-based food business, you might need to comply with Cottage Food Operations rules. Likewise, home daycare centers require stringent licensing. If you’re selling goods, you’ll need a seller’s permit. If you want to post signage, there may be rules, restrictions, or permits required. And certain businesses may require an inspection from the fire department or health department. Visit ​​https://www.calgold.ca.gov/ to check for licenses your business may require.

You can find the entire Monthly CEO Advisory for July by Clicking Here. If you’d like to learn more about starting and maintaining your home business, ABL can help. Book an appointment with us by Clicking Here.