Vast numbers of small business owners run their businesses from home. This will not only save money on office rent but can also qualify you to take the home office deduction on your taxes. However, there can be some legal impediments to working from home.
It’s a business whose primary office is in the owner’s home. This business can be any size or any type as long as the office itself is in the home.
Legal Restrictions on Working at Home
If you decide to work at home, you may have issues with local zoning laws, use restrictions in your lease or condominium rules. You should investigate these potential problems before you open your home office. Even if your community is unfriendly to home offices, there are many things you can do to avoid problems before they arise.
Zoning restrictions
Municipalities have the legal right to establish rules on the types of activities you can conduct in their different geographical areas. For example, they often establish commercial zones for stores and offices, industrial zones for factories and residential zones for houses and apartments.
Though some communities have no zoning restrictions at all (for example, Houston), most do. These restrictions often include laws that limit the kind of business you can conduct in a residential zone. The purpose of these restrictions is to help maintain the peace and quiet of residential neighborhoods.
Fortunately, while some communities remain hostile to home businesses, the growing trend across the country is to permit them. Many cities have updated their zoning laws to permit many home businesses.
Your first step to determine whether you might have a problem working at home is to read your local zoning ordinance carefully. Get a copy from your city’s or county’s website, your city or county clerk’s office or your public library.
What Do Zoning Ordinances Say About Home-Based Businesses?
Zoning ordinances that limit businesses in residential areas are worded in many different ways. Some are extremely vague, allowing “customary home-based occupations.” Others allow homeowners to use their houses for a wide but unspecific array of business purposes, such as “professions and domestic occupations, crafts and services.” Still, others contain a detailed list of approved occupations, such as “law, dentistry, medicine, music lessons, photography [and] cabinetmaking.”
Ordinances permitting home-based businesses typically include detailed regulations on how to carry out business activities. These regulations vary widely, but the most common ones limit your use of on-street signs, car and truck traffic, and the number of employees who can work at your house on a regular basis (some prohibit employees altogether).
Some ordinances also limit the percentage of your home’s floor space that you can devote to your business. Study your ordinance carefully to see how these rules apply to you. If you still aren’t sure whether your business is allowed, you may be tempted to discuss the matter with zoning or planning officials. However, until you figure out the rules and politics of your locality, gather information without identifying or calling attention to yourself. For example, have a friend who lives nearby make general inquiries.
Even if your locality has restrictive zoning laws, you won’t necessarily have problems with your home business. In most communities, such laws are rarely enforced unless one of your neighbors complains to local officials. Neighbors usually complain because you make a lot of noise or have large numbers of clients, employees or delivery people coming and going, causing parking or traffic problems. If you’re an unobtrusive-for example, you work quietly in your home office all day and rarely receive business visitors-it’s unlikely that your neighbors will complain (or even notice).
Homeowners’ association rules
One in six Americans lives in a planned community that has a homeowners’ association. When you buy property in such a development, you automatically become a member of the homeowners’ association. You also become subject to its rules, which are usually set forth in a lengthy document called “covenants, conditions, and restrictions” (CC&Rs). CC&Rs often regulate, in minute detail, what you can do on, in and to your property. The homeowners’ association is in charge of modifying and enforcing these rules.
The CC&Rs for many developments specifically bar home-based business offices. The homeowners’ association may be able to impose fines and other penalties against you if your home business violates the rules. It could also sue you in court to get money damages or other penalties. Some homeowners’ associations are very strict about enforcing their rules against home businesses while others are less so.
Carefully study the CC&Rs before you buy into a condominium, planned development or cooperative to see if home-based business offices are prohibited. If so, you may want to buy somewhere else.
If you’re already in a development that bars home-based business offices, you may be able to avoid problems if you’re unobtrusive and your neighbors are unaware that you have a home office. However, the best course may be to seek to change the CC&Rs. Most homeowner associations rule through a board of directors whose members are elected by all the members of the association. Lobby members of the board about changing the rules to permit home offices. If that fails, you and like-minded neighbors could try to get seats on the board and gain a voice in the association’s policy making.
Lease restrictions
If you’re a renter, check your lease before you start your home business. Many standard lease forms prohibit a tenant from conducting a business on the premises or prohibit certain types of businesses. Your landlord could evict you if you violate such a lease provision.
Most landlords don’t want to evict their tenants. Many don’t care what you do on your premises as long as it doesn’t disturb your neighbors or cause damage. Keep up good neighbor relations to prevent complaints.
However, if you have business visitors, your landlord may require you to obtain liability insurance in case a visitor has an accident, such as a trip or fall on the premises.