Starting a business is complicated. In addition to determining a legal structure, designing marketing materials and setting up credit card processing and merchant accounts services, it is also necessary to establish a physical location from which the business is run. By starting a business from the home, it is possible to defer this complex decision to a later date while moving ahead with the process of establishing a company and engaging customers.
Many business processes require a physical address. For instance, merchant accounts require contact information to reach business owners due to Know Your Customer (KYC) laws. A new business has few or no employees, though, and only requires a physical location for credit card processing and other companies to create a complete customer profile. In these circumstances, renting office space is a completely unnecessary expense for a business with little starting capital.
Further, it is sometimes possible to claim income tax deductions when using part of a home for business purposes. If a room or portion thereof is designated exclusively for business use on a daily basis, and that area is the principal place of business, it may be possible to claim a home-based office deduction and reduce a business’s tax burden. An accountant or tax lawyer should be consulted before claiming this deduction, as there are many subtleties in the U.S. tax code.
Finally, businesses are started from homes and garages because they represent familiar, comfortable places to live and work. Some new businesses are launched as side-projects by those with regular jobs. In those cases, the last thing someone wants is to travel from one office to another. Other businesses are created by stay-at-home parents or retirees, and it may be impossible or make little sense to leave the home to work. Home-based businesses offer a degree of freedom, comfort and empowerment not available in a rented or shared office space, and working from home can establish a good foundation for businesses aspiring to something greater.
Whether changing careers, building a second company or just working a little on the side, home-based businesses are a great choice for those looking for the least expense and friction in starting a new venture. With so many advantages, it is no wonder that many entrepreneurs first look to the home when starting something new.